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Test-Achats

The insurance exemption in the Gender Directive, which allows insurers to take sex into account when calculating premiums and benefits, goes against the principle of equal treatment between men and women and is invalid with effect from 21st December 2012.

Association Belge des Consommateurs Test-Achats ASBL and others 

  • Case C- 236/09

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Facts

This test case originated in Belgium, where a consumer organisation and two private individuals brought an action to declare unlawful a domestic law that allows insurers to take a person's gender into account in the calculation of premiums and benefits in life insurance. 

The law transposes the Gender Directive (2004/113/EC) into Belgian law. The Directive requires all member states to apply the principle of equal treatment between men and women in the access to and the supply of goods and services, including insurance.

Article 5(2), however, enables member states to allow "proportionate differences" in insurance premiums and benefits where the use of sex is a "determining factor" in the assessment of risk "based on relevant and accurate actuarial and statistical data", provided member states ensure that such data is "compiled, published and regularly updated".

All member states who implemented the Directive, including the UK, have made use of the opt-out in article 5(2) in respect of one or more types of insurance. Belgium derogated from the Directive in respect of life insurance. This test case, however, sought a declaration that the national law implementing the derogation was unlawful.

The matter was referred by the Belgian Constitutional Court to the Court of Justice of the European Union. This is the first occasion the European Court has had to consider the substantive provisions of the Directive.

Opinion

Submissions were made to the European Court about the specific characteristics of insurance and the way insurers use actuarial calculations to evaluate risk.

In life insurance and pensions sold by insurers, for instance, what matters is the potential life expectancy of the insured, which, for women, is statistically proven to be longer. In motor insurance, young men are likely to make more expensive claims than women so will generally pay more for their cover.

But in September 2010, Advocate-General Kokott advised the European Court that the use of actuarial factors based on sex was incompatible with the fundamental principle of equal treatment. She proposed that the European Court should declare Article 5(2) invalid.

In her opinion, there was a "sweeping assumption" that statistical differences are essentially due to a person’s sex when, in fact, many other factors play an important role.  "Thus, for instance, life expectancy […] is strongly influenced by economic or social conditions as well as by the habits of each individual." 

"Both women and men nowadays engage in demanding and sometimes extremely stressful professional activities, members of both sexes consume a not inconsiderable amount of stimulants and even the kind and extent of sporting activities practiced by people cannot from the outset be linked to one or other of the sexes." 

Kokott concluded: "The use of a person's sex as a kind of substitute criterion for other distinguishing features is incompatible with the principle of equal treatment for men and women." 

If the European Court followed her advice, she suggested insurance companies should have a transitional period of three years in which to adjust to the new conditions and adapt their products, starting from the date of the judgment.

The judgment

The European Court of Justice held that Article 5(2) should be considered invalid as from 21st December 2012, five years after the Directive came into force.

The Court reasoned that the Charter of Fundamental Rights of the European Union states that any discrimination based on sex is prohibited and that equality between men and women must be ensured in all areas.

The Gender Directive applied this principle of equality to the supply of goods and services. Recital 18 expressly states that, in order to guarantee equal treatment between men and women, the use of sex as an actuarial factor should not result in differences in premiums and benefits.

But the Directive also recognised that the use of actuarial factors related to sex was "widespread" in the provision of insurance at the time the Directive was adopted.

"Consequently, it was permissible for the EU legislature to implement the principle of equality for men and women – more specifically, the application of the rule of unisex premiums and benefits – gradually, with appropriate transitional periods," the judgment states.

The Directive also provided for member states to review their decision to make use of the opt-out by 21st December 2012. But it was silent as to how long they could continue to allow insurers to use gender as a factor.

The judgment concludes: "Accordingly, there is a risk that EU law may permit the derogation from the equal treatment of men and women, provided for in Article 5(2) of [the Directive], to persist indefinitely.

"Such a provision, which enables the member states in question to maintain without temporal limitation an exemption from the rule of unisex premiums and benefits, works against the achievement of the objective of equal treatment between men and women, which is the purpose of [the Directive] and is incompatible with [the Charter].

"That provision must therefore be considered to be invalid upon the expiry of an appropriate transitional period.”

According to the European Court, that period should end on 21st December 2012.

Commentary

In effect, the European Court has put a time limit on what is sees as an exception to the general rule of equality.

Insurers will now need to consider how to price their policies and provide policy terms on a gender neutral basis from 21st December 2012, assuming that any change in UK legislation will not take effect any earlier.

If, as a result, insurers begin to give greater importance to other factors that impact on the likelihood of loss (such as the insured's occupation or type of car), they will need to be very careful that this does not unlawfully indirectly discriminate against one gender.

If builders, for instance, could be shown to be statistically more likely to have car crashes and so are charged higher premiums, then because more men than women are builders, this could amount to indirect discrimination. 

Reliance on other factors as direct proxies for gender, such as shoe size, would also be unlawful.

How the judgment will affect premiums and benefits for policies written before 21st December 2012 is not yet clear. This will be of particular concern to providers of long-term products, who may be required to review the basis upon which existing policies were underwritten.

This uncertainty may be clarified by the UK Government when it reviews existing UK law under the Equality Act in order to implement the judgment. A clear explanation of the policies to which the amended position will apply would be welcome.

There are, however, now concerns that the next step will be restrictions on the use of age in providing insurance services. Age is currently protected against discrimination under EU law. The judgment does not directly impact on this issue, but it may be that the use of age in assessing insurance risk will now be challenged.