Editorial

When the European Court of Justice declared that “taking gender into account as a risk factor when calculating insurance premium prices is discriminatory and forbidden under EU law” it arguably opened a can of worms that is upsetting millions of EU consumers. The European Court also decided it is not fair for men buying annuities on their retirement to receive more than women each month, even though they are statistically likely to die younger.

The implications of this judgment, aimed to enforce gender equality in business decisions, have been quantified by insurers and the resulting costs are quite significant. Open Europe – a British think tank – predicts that young women drivers will pay on average an extra 25 per cent on car insurance premiums as a result of this decision. When it is statistically proven that “men under 22 are 10 times more likely to have a serious accident, 25 times more likely to commit a driving offence and twice more likely to make an insurance claim”, the ruling may not appear all that logical, even if women’s organisations in Malta have welcomed it.

The Court’s decision on the different computation of annuities for men and women based on their different life expectancy also raises eyebrows. The Association of British Insurers predicts that “for annuities, men approaching retirement could face an eight per cent cut in annuity income while the income for women approaching retirement would rise by six per cent”.

The EU directive banning all discrimination based on gender when assessing goods and services came into force in December 2007. Those EU states, including Malta, that were allowed an exemption on this issue will still be expected to abide by the decision of the ECJ by the end of 2012. But many are now likely to wonder whether the often pronounced commitment by Brussels to put the citizen first in all decisions taken by EU institutions is indeed credible.

The decision made by the ECJ judges risks being detrimental to consumers as it could lead to higher general premiums, as the European Insurance Federation has predicted. Of course, this was not the judges’ intention but, in this case, the European Court seems to have overlooked the principles of risk management and pricing, which underpin the governance of the insurance industry. According to Open Europe, the Court “ruled to overturn long-held national rules and increased costs for the consumers in the process. To do this in the name of equality just adds insult to injury”.

To be fair, the EU institutions generally strive to put consumers’ interests on top of their agendas. In a few weeks’ time, the Single Market Act should be approved by the European Council and after its enactment consumers rights should be better protected across EU member states than they are today.

At present, the European Commission is also making final preparations to approve the Insurance Guarantee Scheme Directive that would seek to protect consumers in the eventuality of the bankruptcy of an insurer against whom they have a claim. And in this context, the European Court’s ruling appears to defy common sense and logic by barring insurers from pricing products on the basis of risk.

While some consumer groups, including Test-Achats that challenged present practices in the Belgian courts, have welcomed the European Court’s decision, many others have argued that judges should limit themselves to decide on legal matters and not get involved with the markets.