UK will obey Euro unisex-insurance rules from 2013
'Goes against the grain of common sense'
The UK Government is to abide by a European ruling on the use of gender in insurance, although it says the judgment goes against common sense.
In March 2011, the European Court of Justice ruled in a test case known as the Test-Achats case that from 21 December 2012 insurers will no longer be able to use gender as a factor in the calculation of premiums and benefits.
The decision will affect the way insurers price life and critical illness policies, annuities, private medical insurance, travel insurance, motor insurance and other types of cover where data shows that the sex of the insured can have an effect on the risk.
There was, however, some uncertainty about how the judgment would apply to premiums and benefits for policies written before the 21 December deadline. In a statement to the House of Commons on 30 June, Mark Hoban, the Financial Secretary to the Treasury, outlined the UK government's interpretation of the ruling and its intention to amend the Equality Act 2010.
"The government were very disappointed with this result, which it expects to have a negative impact on consumers," Hoban said. "The judgment goes against the grain of the common sense approach to equality which the UK government wants to see."
"The government believes that nobody should be treated unfairly because of their gender, but that financial services providers should be allowed to make sensible decisions based on sound analysis of relevant risk factors."
Bearing in mind the UK's obligation to implement the decision, however, Hoban said that it would apply the ruling, though only to policies added after the 21 December 2012 date.
"The government's view is that the judgment only applies to new contracts for insurance and related financial services entered into on or after 21 December 2012. In such contracts, the use of gender as a risk factor should not result in individual differences in premiums and benefits for men and women," he said. "However, any contracts with gender-sensitive pricing of premiums or benefits concluded ahead of 21 December 2012 can continue unchanged after that date."
The changes to the Equality Act will be made early next year, following a consultation and impact assessment in the autumn. The government said that it is working with the European Union and other member states to ensure a consistent approach. Mark Hoban said the early indications were that the government's interpretation would be shared across Europe.
"In view of the need for legal certainty, our preferred outcome would be an amendment of the gender directive to give effect to the judgment," Hoban added. "We are therefore disappointed that the Commission has said it has no plans to propose any amendment, leaving the text of the directive inconsistent with the court's decision.
"In view of the 21 December 2012 deadline, we will continue to work with other member states to press the Commission to propose such an amendment at the earliest opportunity."
The European Commission has, however, said it will issue guidance on the judgment and its implementation by member states.
"Although guidance will not offer all the advantages of a legislative amendment, we nevertheless welcome this and will work constructively to ensure it is as helpful and clear as possible," said Hoban. "In view of industry's need for early clarity about how to implement the judgment, we will press the Commission to bring this forward as soon as possible," said Hoban.
"The government has provided a welcome clarification on which UK policies it considers must be gender neutral following the Test-Achats judgment," said Katie Tucker, an insurance specialist at Pinsent Masons, the law firm behind OUT-LAW.COM. "While this gives greater certainty as to how the gender ban impacts upon the insurance industry, it is still important for insurers to consider what will constitute a 'new contract' under both the terms of their policies and UK law, for example whether a review of an existing life contract could trigger the revised Equality Act."
OUT-LAW.COM is part of international law firm Pinsent Masons.
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