Gender and insurance risk

Some thoughts on the European Court of Justice decision on using gender to determine insurance risk

There has been widespread publicity of the  European Court of Justice [ECJ] decision in the case of Association Belge Des Consommateurs Test – Achats ASBL & others (Case C–236/09) to the effect that using gender as a determining factor in assessing insurance risk is illegal.

Opinions in the media have varied from describing the decision as European interference gone mad, a step too far for gender equality, to a victory for consumers against a gender biased insurance industry.

However rather than go over ground already covered, I find myself wondering “what next?”

Will the ECJ move on to the question of age discrimination in the insurance industry? We can barely open a newspaper at the moment without finding a story on the extortionate premiums being demanded of young drivers. However while a young male may, in light of the Test-Achats decision, look forward to a reduction in premiums in the future on the grounds of gender, if I were you I would not hold my breath waiting for a similar finding in relation to age.

The ECJ based their decision in the Test-Achats case on an earlier opinion by the Advocate General in the same case – in other words they followed the Advocate General’s reasoning. That Advocate General’s opinion specifically recognised that age is indispensible in actuarial calculations. Therefore I personally doubt that using age as a factor in determining insurance risk is going to go away any time soon.

There is also the much publicised impact on motor premiums, life premiums and insurance annuities to consider. The insurance industry have been very quick to tell us that we are going to be worse off. Why, however, should that be the case?

Firstly there is a transitional period – the Test-Achats decision does not even come into effect until 21/12/2012.

Furthermore why should the overall cost of (say) motor insurance increase. If the industry needs to bring in a certain amount of money (in the form of premiums) to cover outgoings then why should this judgment affect the amount of money required to come into the system. Should not the overall increase in women’s premiums be offset by an equal decrease overall in men’s?

Of course the insurance industry are rarely slow to see an opportunity. It will be interesting to look back in a year or two and see whether, despite the above points, we are being teed up now to get used to the idea of higher premiums, that these are brought in far earlier than necessary for policies affected by the 21/12/2012 implementation date of the decision, and the insurance industry pockets the windfall.