European Commission issues guidelines to help insurance industry implement unisex pricing

In new guidance (14-page / 70KB PDF) issued to help the industry implement rules preventing insurers from using gender as a risk factor when calculating insurance costs, the Commission said that a "clear distinction" must be made between new and existing arrangements.

However extensions to existing contracts agreed after the date the change comes into force will need to comply with the new rules, the guidance said.

Earlier this year, the European Court of Justice (ECJ) ruled in a case brought by Belgian consumer group Test-Achats that using gender to determine risk when setting the price of insurance premiums was contrary to EU law. The ECJ said that the practice breached the EU's Gender Directive, and that an exception that permitted the activity was "invalid with effect from 21 December 2012".

Earlier this month the UK Government said that women drivers would pay over £900 million more a year for motor insurance than they currently do as a result of the changes.

The Commission said that its guidance clarified a series of issues raised by individual member states and insurers during a consultation process. It confirmed that the effect of the Test-Achats ruling only applies to "new" contracts concluded after 21 December 2012. This includes where an offer of a new insurance contract is made before the law changes, but "accepted as from that date".

However an automatic extension to a pre-existing contract under the terms of that contract or any top-up or follow-on policy where the terms were agreed before 21 December 2012 would not count as a new contract, the guidance said. The new rules would also not apply where an automatic adjustment is made to an existing contract where the consent of the policyholder is not required, such as an increase in premiums as a result of the policyholder losing out on any no-claims 'bonus', it said.

The guidance also provides examples of gender-related insurance practices which are compatible with the overall principle of unisex premiums and benefits. Insurers will be able to collect, store and use gender information in their internal risk assessments, and in medical underwriting where "insurers need to take gender status into account in light of certain physiological differences" between men and women. Insurers will also be able to target their advertising to a particular gender, although they will not be able to refuse access to a particular product because of a person's sex.

EU Justice Commissioner Viviane Reding said that the Commission had followed though on its promise to help insurers and consumers adapt to the ruling by issuing its guidance a year before the ECJ's deadline.

"It is now up to the insurance industry to ensure that there is a smooth transition to fully equal treatment of men and women in insurance. The Commission will remain vigilant in how the industry implements the court's ruling. I expect that insurers that move to a unisex tariff first will have a competitive advantage on the European market," she said.

In the UK, the Treasury plans to make amendments to the Equality Act in order to comply with the ruling and has already confirmed that contracts concluded before 21 December next year will not have to be altered, even if gender was taken into account in assessing the risk. It has issued a consultation asking for industry views on the proposed changes, which will close on 1 March 2012.