Insurance premiums for many people look set to rise significantly from next year following a ruling by Europe’s highest court prohibiting companies from using a person’s gender to determine prices.
Women will see life assurance and motor insurance policies climb while income protection and critical illness premiums are likely to increase for men and industry sources have predicted that insurance companies will use the ruling for their benefit.
Last October, the European Court of Justice advocate general Juliane Kokott published a ruling arguing it was “legally inappropriate” to link insurance risks to a person’s gender and yesterday the European Court of Justice backed her decision.
"Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination," the court said.
A gender discrimination ban came into force at the end of 2007 but it allowed member states to continue to use current pricing models for five years, "so long as they can ensure the underlying statistical data on which the calculations are based are reliable".
The ECJ said yesterday that “the derogation from the general rule of unisex premiums and benefits is invalid with effect from December 21st 2012."
The ECJ decision will force a complete overhaul of the current practice across Europe of basing insurance rates on statistics about differing life expectancies or road accident records of the sexes.
Statistics show that men in certain age groups are more likely to have an accident than women and so pay more for their insurance. This is particularly the case for men under 30 who can pay nearly 100 per cent more for motor insurance than their female counterparts
Older men also pay more based on gender. A 35-year old man who lives in the same area and drives the same car as a woman of the same age pays approximately 30 per cent more for a motor insurance policy, according to Fiona Deering, a director of online insurance brokers insuresave.ie.
Men also pay more for life insurance because they die earlier Women pay more when it comes to pension funds, again because of a longer life expectancy.
The delay in implementation of the ruling will give insurance companies and risk assessors time to change the template for risk assessment by ignoring traditional statistical gender-based evidence but experts are predicting that it is unlikely to be good news for consumers.
The decision drew condemnation from the industry, which said differential pricing for men and women was legitimate given their different risk profiles. The chief executive of the Irish Insurance Federation (IIF) Mike Kemp said he was “disappointed” by the ruling.
He said female drivers benefitted from discounted rates for motor insurance, because of their better claims record, and paid lower rates for life assurance because of greater life expectancy than men. For the same reason men get better rates for pension annuities.
"Insurers have always priced risk objectively based on statistical evidence and there is no reason why this process should be interfered with," he said. "The actual adjustment of rates to comply with the judgment and the timing of any changes are matters for each insurer to decide, but clearly some policyholders in various classes of insurance who previously benefited from discounts based on gender will now not be offered the same discounts and therefore may see their premiums rise".
“This ruling is likely to be unfair for some people. It means that low risk customers could pay more for their insurance needs, even if they present a lower insurance risk to the insurer.” said Ms Deering. “It could also mean women pay more for life insurance.”
She said she expected insurers “to use the ruling to their benefit, I would expect that prices for women will increase more than the prices for men will drop on the back of this ruling”
The chief executive of the Professional Insurance Brokers Association (PIBA) Diarmuid Kelly said insurance companies would have no option but to introduce unisex rates. “There will be winners and losers. What we don’t know, as yet, is precisely how insurance companies are going to implement non-discrimination on the basis of gender.
He said the ruling would in all likelihood lead to increases in premiums for female drivers. “In the case of car insurance it is likely to mean young male premiums will fall while young female premiums will rise. If we take the example of a male and female driver from Wexford, both aged 24 and both of whom drive a 2008 Ford Focus. In this case, the difference in the premium for a fully comprehensive policy can be as much as €400 more for the male driver.”
