EU rules on gender-neutral pricing in insurance industry enter into force
Under new rules which are entering into force, insurers in Europe will have to charge the same prices to women and men for the same insurance products without distinction on the grounds of sex.
This means that insurance prices could rise or fall in the short term for certain categories of customers while they are likely to balance out over time. The change comes after the Court of Justice of the European Union ruled that different premiums for men and women purely on the grounds of sex were incompatible with the principle of unisex pricing included in EU gender equality legislation, and with the EU Charter of Fundamental Rights.
“Gender equality is a fundamental right in the European Union and the Court of Justice made clear that this also applies to insurance pricing," said Vice-President Reding, the EU’s Justice Commissioner. "The insurance sector has had over a year to prepare the switch over to unisex pricing and the European Commission has helped the industry to adapt during this period. The Commission will monitor how the industry will implements these new rules in practice. ”
In its ruling on 1 March 2011 in the Test-Achats case (C‑236/09), the Court of Justice of the EU gave insurers until 21 December 2012 to change their pricing policies in order to treat individual male and female customers equally in terms of insurance premiums and benefits (MEMO/11/123).
Following the Court's judgement, Vice-President Viviane Reding, the EU's Justice Commissioner, met with leading EU insurers in September 2011 to discuss how the Commission can help the industry to adapt to the Court's ruling (MEMO/11/624). As a result on, 22 December 2011, the Commission gave the industry concrete guidance on implementing the ruling (IP/11/1581).
Questions and answers
The Test-Achats case (C-236/09), which was referred by the Belgian Constitutional Court, concerned gender discrimination in insurance pricing. On 1 March 2011, the Court of Justice of the European Union declared invalid as from 21 December 2012 an exemption in EU equal treatment legislation which allowed Member States to maintain differentiations between men and women in individuals' premiums and benefits.
Council Directive 2004/113/EC on equal treatment between men and women in access to and supply of goods and services (adopted unanimously by the EU Council of Ministers) prohibits direct and indirect gender discrimination outside of the labour market.
Before the ruling, Article 5(2) of the Directive gave Member States a right to derogate from the unisex rule with regard to insurance contracts. All Member States made use of this derogation for some or all insurance contracts. For example, Belgian law includes a derogation for life insurance in its national legislation. It was in fact a dispute about the legality of Belgium’s derogation which led to the European Court of Justice’s Test-Achats ruling.
The Court found the exemption to the unisex rule in Article 5(2) was incompatible with the purpose of the Directive and, therefore, with the EU's Charter of Fundamental Rights. The Court ruled that the derogation was invalid, with effect from 21 December 2012.
The Test-Achats ruling does not mean that women will always pay the same car insurance premiums as men.
At the moment, a careful young male driver pays more for auto insurance just because he is a man. Under the ruling, insurers can no longer use gender as the sole determining risk factor to justify differences in individuals' premiums. But the premiums paid by careful drivers – male and female – will continue to decrease based on their individual driving behaviour. The ruling does not affect the use of other legitimate risk-rating factors (such as, for example, age or health status) and prices will continue to reflect risk.
Gender is a determining risk-rating factor for at least three main product categories: motor insurance, life insurance/annuities and private health insurance. In all three categories, it is likely that a transition towards unisex pricing will have consequences on premiums and/or benefits at the individual level for men and women. Depending on the product concerned, premiums might increase or decrease for certain categories of consumers.
The insurance industry is competitive and innovative. It should be in a position to make these adjustments and offer attractive unisex products to consumers without unjustified impact on the overall price level. Price reductions resulting from unisex pricing should be passed on to consumers with the same level of fairness as price increases.
The implications of the judgment were discussed on 20 June 2011 with Member States and stakeholders at the Forum on Gender and Insurance set up by the Commission in 2009. European Justice Commissioner Viviane Reding also met leaders of European insurance companies on 21 September 2011 (MEMO/11/624).
On 22 December 2011, the Commission adopted guidelines to help the insurance industry implement unisex pricing (IP/11/1581). The guidelines offered practical guidance on the implications of the ruling, for the benefit both of consumers and insurance companies.