ECJ tells insurance and pension providers not to use gender to discriminate

The European Court of Justice has today followed Advocate General Kokott's Opinion that men and women must be treated equally in relation to insurance contracts and that gender cannot be used as a risk factor when determining premiums and benefits. The effect of this is that Article 5(2) of the Gender Directive has been declared invalid, although this will not take effect until 21 December 2012, in order to allow insurance companies to adjust their products accordingly.

The ECJ's Judgment

This ECJ judgment is in response to a reference to it from the Belgian Constitutional Court, concerning the compatibility of Article 5(2) with the principle of equal treatment for men and women.  Article 5(2) allows Member States to permit differences in premiums and benefits, with gender being used as a determining factor in the assessment of risk, where it is based on relevant and accurate actuarial and statistical evidence.

Both the Advocate General and now the ECJ have emphasised that respect for fundamental human rights is a condition for the lawfulness of all European legislation and Article 5(2) is therefore subject to the principles of non-discrimination, equality and respect for human dignity.  A person's gender, race and ethnic origin cannot be used as a ground for differentiation.  

It was intended that any decision by a Member State to make use of the derogation under Article 5(2) was to be reviewed by the European Commission by 21 December 2012.  However, the ECJ considers that there is a potential risk that a Member State's derogation from the principle of equal treatment may last indefinitely: "such a provision, which enables the Member States in question to maintain without temporal limitation an exemption from the rule of unisex premiums and benefits, works against the achievement of the objective of equal treatment between men and women…and is incompatible [with fundamental human rights]." It has made it clear that any provision by Member States to allow differences to individual premiums based on gender will be invalid with effect from 21 December 2012.

Commercial implications

Member States will have to review national legislation to confirm compatibility with the judgment and pensions and insurance companies will need to ensure that their products take account of the principles by 21 December 2012.  The ECJ believes that insurance companies can no longer take account of gender differences when calculating risk and premiums from 21 December 2012.  Similarly, pensions companies should no longer differentiate between sexes when determining the cost of annuities.  Factors that have previously been taken into account, for example evidence that women live longer or that young men are more likely to be in car accidents, should be disregarded in favour of a "unisex" approach.

The practical effect for consumers are likely to be that young male drivers find their premiums reduced, while young female drivers face paying significantly more. Similarly, women may be able to claim higher annuities on their pensions, while men may lose part of their monthly pensions.

Lawyers Robert Vidal, Louisa Penny