Some light has been thrown as to how the insurance industry can go about ensuring non-discriminatory pricing in so far as insurance premiums are concerned. Following last year’s ruling by the European Court of Justice, whereby insurers were given until December 21, 2012 to treat male and female clients equally in terms of insurance premiums and benefits, industry had been left very much in the dark as to how it could go about ensuring compliance with such ruling. The European Commission has now adopted practical guidelines to assist the insurance industry implement unisex pricing. Gender is a determining risk-rating factor for at least three main insurance categories, namely, motor insurance, life insurance and private health insurance. In terms of the court’s ruling, insurers can no longer use gender as a determining risk factor to justify differences in individuals’ premiums, even when this is based on relevant and accurate actuarial and statistical data. In practice, this means, that for example, a careful male driver cannot pay more than a careful woman driver just because statistical data proves that women are more careful drivers than men. On the other hand, the court’s ruling does not mean that women will always pay the same car insurance premiums as men because premiums will still be based on the individual driving behaviour of both men and women.
The European Commission has adopted practical guidelines to assist the insurance industry implement unisex pricing- Mariosa Vella Cardona
The Commission guidelines clarify that the court’s ruling applies only to new contracts and in particular to contracts concluded as from December 21, 2012. In order to ensure uniformity across the EU in the application of the unisex rule, the Commission has given concrete examples of what is considered a “new contract”. Contracts concluded for the first time as from December 21, 2012, even though offers were made before the latter date, as well as agreements between parties, concluded as from December 21, 2012, to extend contracts concluded before that date, which contracts would otherwise have expired, are to abide by the unisex rule.
On the contrary, certain situations should not be considered as constituting a new contractual agreement and hence fall outside the purview of the court’s ruling. Therefore, for example, the automatic extension of a pre-existing contract if no cancellation notice is given by a certain deadline as a result of the terms of the pre-existing contract is not to be considered as a “new contract”. Similarly, adjustments made to individual elements of an existing contract, such as premium changes, on the basis of predefined parameters, where the consent of the policy-holder is not required, also fall outside the purview of the court’s ruling. The mere transfer of an insurance portfolio from one insurer to another, which does not change the status of the contracts included in that portfolio, is also excluded from the application of the unisex rule.
The Commission clarified that the use of gender as a risk-rating factor in general is permissible and is allowed in the calculation of premiums and benefits at the aggregate level, as long as it does not lead to differentiation at individual level. The guidelines provide examples of gender-related insurance practices which are compatible with the principle of unisex premiums and benefits, and which therefore will not change because of the court ruling. Thus, for example, insurers remain able to collect and use gender status for internal risk assessment, mainly to calculate technical provisions in line with insurance solvency rules and to monitor their portfolio mix from an aggregate pricing perspective.
The Commission also clarified that, particularly in the case of life and health insurance policies, it still remains possible for insurers to take certain risk factors, such as health status or family history into account. In such cases, differentiation on the basis of such risk factors is possible, even if insurers need to take gender status into account. This, in the light of certain physiological differences between men and women. For example, a family history of breast cancer does not have the same impact on a man and on a woman’s health risk and obviously the assessment of this impact requires knowledge of whether the person is a woman or a man.
The Commission also considers that, as a rule, it remains possible for insurers to offer gender-specific insurance products to cover conditions which exclusively or primarily concern males or females.
It is now up to the individual member states to ensure that, by latest December 21, 2012, their legislation and the practical application of same by insurance companies in their territory are in line with the court’s ruling as interpreted by the European Commission. The Commission has also warned industry that it will not tolerate unjustified rises in the pricing of insurance premiums which are attributed by the industry to the concrete application of the unisex rule.
mariosa@vellacardona.com
Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is the deputy chairperson of the Malta Competition and Consumer Affairs Authority as well as a member of the National Commission for the Promotion of Equality.