European Court bans gender as factor in insurance

The European Union's high court ruled Tuesday that insurers and pension plans cannot offer different contracts for men and women because that amounts to sex discrimination.

The ruling by the European Court of Justice could mean that women drivers across Europe would pay more for their car insurance costs even though they are considered safer on the road. Pension and medical insurance plans will also have to be adjusted when the new rules become effective in late 2012.

Insurers grudgingly accepted the ruling, but said the change will be bad for customers and they maintained that their current policies were fair. They insisted that the typically longer lives of women should be taken into account when offering life insurance policies, for instance.

"The judgment ignores the fact that taking a person's gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance," said Maggie Craig, the acting director general of the Association of British Insurers.

The European Union had already imposed an equal treatment system in 2007 but left the possibility for some unlimited transitional period. Tuesday's ruling closes that loophole.

Currently millions of insurance policies take gender into account. The court ruled that practice as inappropriate since there are myriad other factors that could be considered. Gender, however, is typically easy to check and can point to sound statistical conclusions, the industry says.

"Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination," the court said in a statement.

The Belgian consumer group Test-Achats, which brought the case, called the decision historic.

"The equal treatment of men and women must be absolute," the group said in a statement.

Even if women are considered safer drivers, the question remains whether a man should be punished by paying more despite taking special care to drive safely. Test-Achats says there are other ways insurance companies can make a distinction, for example by taking the accident history of a driver more into account.

Policies are also decided on the basis that women live longer than men. Test-Achats also questioned why a woman who smokes and lives more dangerously should be assessed by the standards of an average woman while a man who exercises, eats healthily and does not smoke cannot see his lifestyle taken into account.

"You have to complement the statistical approach but one which is more respectful of the rights of each individual taking lifestyle into account," the group said.

(Published by NY Times - March 1, 2011)