ECJ ruling -1 Mar 2011 Test Achats Case – 2008
The European Court of Justice (ECJ) ruled that it is discriminatory to charge gender specific premiums regardless of the statistical evidence to back up a difference. Traditionally male lives are charged a higher premium for life cover, compared to females, owing to the higher risk associated with male lives.
In other words, the ECJ are now happy that those who are a higher risk to pay lower premiums and hence will be subsidised by lower risk individuals who will pay higher premiums relative to their risk.
The Irish life insurance industry uses gender as an important rating factor which evaluates a customer risk and hence is used in calculating the cost of cover. This has been in place for a long time and is broadly accepted by society as correctly reflecting the approach that the premium a customer is charged should reflect their relative risk.
Removing of the use of gender in the calculation of some insurance products’ premiums leads to the introduction of uncertainty for insurance companies where it didn’t previously exist.
The ruling was past on the 1st March 2011 but the court accepted that it would take some time to implement. As a result unisex rates must apply with effect from the 21st December 2012.
The philosophy behind the ruling.
The philosophy of the EU Gender Directive is that men & women should be treated the same, which is an approach that the vast majority of people agree with.
However, the ECJ ruling will have a big impact on the efficiency of the insurance industry in Ireland. Removing of the use of gender in the calculation of some insurance products’ premiums leads to the introduction of uncertainty for insurance companies where it didn’t previously exist.
What impact will this have on Clients?
It is difficult to access at the moment but ultimately, we see life cover premiums for female lives increasing over the longer term. However, with the insurance industry been very competitive, the life companies may reduce male rates down and bring them closer inline with female rates for a short period.