The European Court of Justice has today struck down European legislation which permitted insurers to price risk by reference to data that distinguishes specifically between men and women. Michael Wainwright, partner at international law firm Eversheds comments:
“This ruling seems to put European insurers at a disadvantage to other insurers, who will not be required by law to take a blinkered view of their data.
“The challenge for European insurers will be to reassess their data and place greater reliance on the predictive value of information other than gender. So for example, postcode data may assume greater importance and possibly income or employment history, where available. Insurers have until December 2012 to come up with their new strategies for pricing risk. Time will tell whether this deadline will produce a last minute fire sale of cheap car insurance for women and annuities for men, or whether the new politically correct pricing will mysteriously produce results broadly similar to current rates.
“While insurers can be expected to get over this setback to the established practice of decades, they may harbour concerns as to where the European court might go next. A ban on the use of age based data would be more difficult to cope with, but clearly within the scope of current legislation on equality.
“It may well be said that the historic practice of the insurance industry placed far too much emphasis on gender in proposal forms, pricing and reporting on experience, at the expense of other relevant factors. Arguably this has been unhelpful to the debate on equality. However, it should not be assumed that today’s ruling will result in total equality. The market will move on and insurers will look to other factors to price risk that could in time prove as controversial and socially divisive as gender has done today.”