Out-Law / Your Daily Need-To-Know

From 21st December 2012, insurers will no longer be able to use gender as a factor in the calculation of premiums and benefits, following a ruling by the European Court of Justice.

This guide is based on UK law and was last updated on 14th March 2011.

The decision means insurers will have to change the way they price life and critical illness policies, annuities, private medical insurance, travel insurance, motor insurance and other types of cover where data shows that the sex of the insured can have an effect on the risk.

The EU Gender Directive 2004 requires all member states to apply the principle of equal treatment between men and women in the access to and the supply of goods and services, including insurance.

But it also provides that member states can allow "proportionate differences" in premiums and benefits in the provision of insurance and related financial services where the use of sex is a "determining factor" in the assessment of risk "based on relevant and accurate actuarial and statistical data", provided member states ensure that such data is "compiled, published and regularly updated" (Article 5(2)).

The Directive was silent on how long this exemption could continue. It did, however, require those member states who chose to implement it to review their decision by 21st December 2012, five years after the Directive came into force.

On 1st March 2011, however, the European Court ruled in a test case that Article 5(2) would be invalid from that date.

Test case

The action was bought by Belgian consumer association Test-Achats and concerned Belgium’s adoption of Article 5(2) for life insurance. The matter was referred by the Belgian Constitutional Court to the Court of Justice of the European Union.

In September 2010, Advocate-General Juliane Kokott, advised the court to declare Article 5(2) invalid on the ground that taking into account statistical differences between men and women was incompatible with the fundamental principle of equal treatment.

She also suggested that insurance companies should have a transitional period of three years in which to adjust to the new conditions and adapt their products, starting from the date of the judgment.

The European Court agreed that Article 5(2) should be considered invalid, but chose a shorter transition time, giving insurers until 21st December 2012 to prepare for the change.

Katie Tucker, an insurance law expert at Pinsent Masons, the law firm behind OUT-LAW.COM, said the transitional period would be a relief to insurers, who had been warned that immediate or even retrospective implementation was a possibility.

"At least this gives insurers a decent amount of time in which to bring their systems and processes into line," she said. "The transitional period reflects the European Court’s appreciation of the huge change its ruling will mean for the way in which the insurance industry prices and provides benefits under insurance."

"A real concern is the remaining uncertainty relating to the impact of the judgment on premiums and benefits for policies written prior to 21st December 2012," Tucker added. "It will be important for the Financial Services Authority to be fully engaged with the issues and to provide clear guidance so that insurers can be reassured that they are achieving the EU’s goals in a way that is compliant from an FSA perspective and which treats customer fairly."

Nicola Bumpus, a pensions law expert at Pinsent Masons, said that the ruling means that insurance companies will have to change the way they calculate annuity prices (the amount of retirement income an individual will get for their retirement savings).

"The decision has significant implications for pension schemes," she said. "Where any pension scheme benefits are bought from an insurance company, which principally means retirement income from defined contribution and personal pension plans, prices will change from the end of next year. It may be that in practice everyone is worse off as women will get little extra pension for their savings and men will see a drop in their pension income as a result."

Research commissioned by the Association of British Insurers (ABI) in 2010 suggests the judgment will result in women under the age of 25 paying an average of 25% more for their motor insurance.

In addition, men nearing retirement could see an 8% reduction in annuity rates while rates for women could rise by 6%. Women buying life insurance could see premiums rise by up to 20% while men could see a fall of about 10%.

The UK regulations

In the UK, the Gender Directive was implemented into law by the Sex Discrimination Act 1975 (Amendment of Legislation) Regulations 2008.

In accordance with Article 5(2) of the Directive, the regulations provide that the use of sex as a factor in the assessment of insurance risk must be based on relevant and accurate actuarial and statistical data compiled, published and regularly updated in accordance with guidance issued by the Treasury. Any differences in treatment must be proportionate and must not result from costs related to pregnancy or maternity (see below).

Direct discrimination in the provision of services on the grounds of gender reassignment is also prohibited, subject to the same insurance exemption regarding the use of actuarial and statistical data outlined above. Insurers should calculate premiums and benefits on the basis of a transsexual person's legal sex, which is the sex on their birth certificate unless they have legally changed their sex and have a Gender Recognition Certificate.

In addition to meeting the requirements of the Directive, the regulations confirm that insurance and related financial services can be provided to members of only one sex in relation to risks that affect only that sex.

The 2008 regulations will no doubt be amended to reflect the European Court's decision. New policies written after 21st December 2012 will have to be gender-neutral. But it is not yet clear how the ruling will be applied to policies written before that date.

Pregnancy and maternity

As from 22nd December 2008, it became unlawful to treat a woman less favourably on the grounds of her pregnancy or maternity in the provision of goods and services.

In the insurance context, this means any differences in treatment which result from costs related to pregnancy or maternity will be unlawful. There is no exemption relating to the use of actuarial or other data and so the prohibition is unaffected by the judgment in the Test-Achats case.

The Directive did not define "maternity" but the regulations specify a period of 26 weeks after the birth, which reflects the period of a woman's ordinary maternity leave entitlement in the employment context. After 26 weeks, a woman would be able to pursue a claim for direct or indirect discrimination on grounds of gender in the normal way.

The regulations include an exemption where a service provider reasonably thinks that providing goods, facilities or services at all or without certain conditions would, because of the pregnancy, create a risk to a woman's health or safety and it has an equivalent policy relating to people with other physical conditions.

The exemption reflects concerns raised by the aviation industry that airlines' policy of not carrying late-term pregnant women on flights for health and safety reasons would be in breach of the Act. The exclusion might also apply to dangerous activities such as bungee jumping or rock climbing.

Proving discrimination

The regulations also make it easier for claimants to bring successful discrimination claims by reversing the burden of proof.

The claimant must establish facts which would, in the absence of an adequate explanation from the respondent, lead to a conclusion that they had been discriminated against. It is then for the respondent to show a non-discriminatory reason for its actions. There is still no upper limit on the damages that can be awarded for a successful discrimination claim.

The Equality Act 2010

The Equality Act 2010 prohibits conduct that discriminates directly or indirectly against someone with a "protected characteristic". Nine such characteristics are listed: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

Under section 29, a service provider (including a provider of financial services) providing a service to the public or a section of the public must not discriminate against a person by not providing, or by terminating, the service, by the terms it imposes or by subjecting the person to any other detriment.

Most of the provisions of the Act came into force on 1st October 2010 and now form part of the law of England and Wales and (with minor exceptions) Scotland, but (again with a few exceptions) not Northern Ireland.

Under the Act, direct discrimination is defined as treating someone less favourably because of a protected characteristic (section 13).

Indirect discrimination occurs when a policy which applies in the same way for everybody particularly disadvantages people with a relevant protected characteristic because they have that characteristic (section 19). Such treatment will not be discriminatory if it can be justified as a proportionate means of achieving a legitimate aim.

Indirect discrimination applies to all the protected characteristics except pregnancy and maternity.
Section 14 provides that a person who has suffered direct discrimination because of a combination of two relevant protected characteristics can, for the first time, bring a dual discrimination claim. The relevant characteristics are age, disability, gender reassignment, race, religion or belief, sex and sexual orientation.


Exceptions relating to insurance are covered in Schedule 3, Part V, which has not yet been brought into force.

To a great extent the exceptions mirror existing legislation in relation to disability, sex, gender reassignment, pregnancy and maternity.

The exemption covering the use of sex as a factor in the assessment of risk replicates the regulations outlined above for policies entered into on or after 6th April 2008 and restates the provisions in the 1975 Act that still apply to policies entered into before that date.

Accordingly, the schedule provides that differences in treatment based on sex will not breach the prohibition, provided they are proportionate and based on relevant and accurate actuarial and statistical data which is regularly updated and available to the public. For policies entered into before 6th April 2008, there is no requirement for the data to be published.

In light of the Test-Achats case, however, it seems likely that this part of the schedule will not be bought into force and that the existing regulations (duly amended to reflect the ruling) will continue to apply until 21st December 2012. 

Other parts of the schedule, however, remain relevant. For instance, the absolute prohibition on differences in insurance premiums and benefits resulting from costs relating to pregnancy or maternity, which applies to contracts entered into from 22nd December 2008.

A further exception provides that insurers will not be in breach if they continue to apply terms in policies that were entered into before the relevant provision came into force. But where pre-existing policies are renewed or their terms are reviewed after that date, they will have to comply.

There is also a new exception relating to the provision of group health insurance schemes or group personal pensions under an arrangement with an employer. 

Insurance and pension providers entering into such arrangements with employers will not be responsible for ensuring the scheme does not discriminate against individual employees. The employer, however, will be responsible for ensuring that the provision of benefits under the scheme complies with the work and employment provisions in the Act.

The Equal Treatment Directive

The European Parliament and European Council are currently negotiating the terms of a new Equal Treatment Directive aimed at providing protection outside the workplace from discrimination on grounds of age, disability, sexual orientation and religion or belief.  

The draft directive has a broad remit, covering the provision of social services, healthcare, education and housing as well as access to and the supply of goods and services, including insurance. Discrimination on grounds of sex, however, is not included and will continue to be dealt with under the Gender Directive. 

Contact: Katie Tucker ([email protected] / 020 7667 0116)


See also: Age discrimination and insurance, an OUT-LAW Guide

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