By Martin Banks - 1st March 2011
This ruling has pushed anti-discrimination legislation beyond the realms of all common sense
MEPs and the insurance industry have condemned a landmark European court ruling that insurers cannot charge different premiums to men and women because of their gender.
The European Court of Justice (ECJ) decision means that women can no longer be charged lower car insurance premiums than men, and the cost of buying a pensions annuity will change.
The court was ruling on a challenge by the Belgian consumer group Test-Achats.
It had argued that a current exemption for insurers contradicted the wider European principle of gender equality.
The ruling will take effect on 21 December 2012.
In its ruling, the Strasbourg-based ECJ said, "Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination."
The ECJ upheld the opinion of its top adviser and said that singling out women for preferential treatment contravenes article eight of the EU treaty.
The ruling will see insurance premiums for female drivers under 26 rise by about 25 per cent, according to the Association of British Insurers.
EU justice commissioner Viviane Reding welcomed the ruling as "an important step towards putting the fundamental right of gender equality into practice," and said she would convene a meeting with insurers in the coming months to discuss its implications.
"A modern insurance company should not distinguish between women and men," she said.
"All customers should be treated equally. This is not only a matter of respect for fundamental righs. It is also a matter of good business practice," said Reding, who has championed gender equality in boardrooms.
MEP reaction was swift, with UK Conservative deputies branding the ruling as 'a setback for common sense'.
Martin Callanan, leader of the UK Conservative MEPs described the ruling as "nonsense".
He said women now faced "devastating hikes in already sky-high motoring bills".
His MEP colleague Sajjad Karim was equally scathing, saying, "This ruling is utter madness. It is a setback for common sense.
"It is a statistical reality that young men have more accidents than women so it should be reflected in their premiums.
"Once again we have seen how an activist European Court can over-interpret the treaty. The EU's rules on sex discrimination specifically permit discrimination in insurance if there is data to back it up.
"Unelected judges have overruled the will of democratically elected MEPs and governments; is it any wonder people are do disenchanted with the EU?
"Boy racers will now have even more money to buy unsafe fast cars, whilst safer drivers will be hit hard in their insurance premiums. This is a victory for boy-racers and a major blow for both democracy and careful women drivers."
The UK-based think tank Open Europe estimates that, on average, a 17-year-old female driver will now have to pay an extra €5000 in insurance premiums by the time she is 26 as a consequence of the ruling.
Its research director Stephen Booth said, "This ruling has pushed anti-discrimination legislation beyond the realms of all common sense.
"Unaccountable EU judges have ruled to overturn long-held national rules and increased costs for consumers in the process. To do so in the name of equality just adds insult to injury.
"This goes to show that EU judges are able to rewrite national laws but with no democratic controls in place to ensure that their rulings make sense and are proportionate. Clearly, it's time to put some checks on these judges, and the UK government needs to take a far stronger position in pushing for reforms.
"Otherwise, it's only a matter of time before we see another EU ruling which has a negative impact on individual citizens or the UK economy as a whole."
Further condemnation came from UKIP MEP Godfrey Bloom, who said, "The EU judges do not understand that insurance premiums are not random chance but risk assessed. Women drive more safely than men, particularly in the younger age group and men do not live as long as women which is a simple actuarial fact of life.
"This is simply social engineering which will lead to higher prices for everyone, the law of unintended consequences. Risk assessment is simply part of the international insurance industry's whole raison d'être."
UK Liberal Democrat European justice and human rights spokeswoman Sarah Ludford said, “Of course, no woman wants to see her car insurance premium rise. But I guess we can't expect to benefit from discrimination at the same time as complaining about it. And the upside is that women must get the same pension annuity payments as men instead of less because they live longer.”
“Regulators must ensure that insurance providers don’t use this judgement to sneakily profiteer by hiking up women's premiums or lowering men's pension benefits. And they must push industry to provide policies that are tailored to individuals and properly assess their track record and behaviour."
The response of the insurance industry was no better, with the CEA, the European insurance and reinsurance federation, saying it was "deeply disappointed" by the judgement.
Its director general Michaela Koller, said, "The decision of the judges not to recognise that gender is a legitimate factor in insurance pricing and that insurance pricing is based on a fair risk assessment process could be bad news for insurance customers.
"Insurers will consider this judgement carefully and will ensure that there is minimum disruption and impact for consumers. Nevertheless, Europe-wide the effect on the price and benefits and on the choice of insurance products for consumers could be significant."
Darren Philp, of the UK National Association of Pension Funds (NAPF), said he was disappointed with the ECJ decision, which would lead to a worsening of people's pension incomes.
"The data shows that there is a clear difference between them when it comes to longevity," he said.