subject: Insurance differentials exemption under threat [print this page] Insurance differentials exemption under threat
The European Court of Justice (ECJ) has announced that it will give its judgement in the Test-Achats case on1st March 2011. In pricing policies, insurance companies can charge a different price to a man and a woman, where that differential is justified through the use of actuarial factors reflecting different experience as between comparable men and women. For example, a woman will usually be charged a higher rate for an annuity than a comparator male of the same age. This reflects the expected longer life expectancy of women.
Test-Achats challenges the legality of Article 5 (2) of the Gender Directive, which allows insurance companies to charge different levels of premium and to provide different levels of benefit to men and women provided that sex is a "determining factor" in the assessment of risk.
On 30th September Advocate-General Kovats concluded that Article 5 (2) is not compatible with the principle of equal treatment under EU law and is therefore unlawful.
The Advocate General's opinion is not binding, but the full court usually follows it. If the ECJ follows the usual trend, insurers would no longer be allowed to use differential pricing of insurance policies for men and women in comparable situations.
If the challenge is successful, the decision is likely to have a substantial impact on UK insurance businesses, especially those who offer products such as critical illness insurance, annuity products, life assurance and car insurance.
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