European Union Law - Ageism - March 2011

Posted on 9:43am Wednesday 9th Mar 2011

European Union Law – Ageism – Life Insurance Premiums to rise

The European Court of Justice ruling of last week could mean that insurers could be banned from using age as well as gender to set premiums if the European Union adopts age discrimination laws for goods and services.

The concept, due to be debated in the summer of 2011, would have far-reaching implications for life and medical insurance in the United Kingdom of Great Britain and Northern Ireland, with premiums for consumers in their thirty’s potentially doubling.

It follows a ruling last week by the European Court of Justice stating that insurers who set different premiums for men and women were contravening laws banning gender discrimination by goods and services providers.

A discrimination directive that forbids age bias has already passed through the European Parliament – the first stage before any directive becomes law – and will be debated by the European Council in June.

If it becomes law, insurers that set prices according to age could be challenged in the European Courts. There is already a rule banning such discrimination by employers and training providers.

The directive could mean the cost of products such as medical, life and critical illness insurance cover could rise for younger people, as age is one of the most important risk factors for insurers – even more so than gender.

A life insurance policy that pays £200,000.00 to dependents on death currently costs £9.00 per month, or £108.00 a year, for a thirty year –old man. With a ban on age discrimination customers would probably pay a larger amount.

All forms of discrimination are not permitted in accordance with the European Commission’s Charter, so even if age discrimination rules excluded financial services, this could be challenged.

While age discrimination is still being debated, the gender bias ruling already has wide implications for the insurance industry and annuity providers.

Premiums for woman car drivers, who generally pay less than men because they have fewer accidents, could rise by an average of twenty – five percent. Young women are likely to be hardest hit as the difference in car insurance premiums is greatest in that age group. The cost of insurance cover for young women will rise to what young men pay today.

The European Court of Justice ruled that gender discrimination in insurance pricing must end by 2013.

The ruling on gender has already upset drivers and insurance companies. They claim that statistics bear out their view that men are a higher risk than women, justifying higher premiums.

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