European insurers are anxiously awaiting a landmark decision by judges in Luxembourg today that could tear up their historic pricing strategies and force up the costs of cover for millions of policyholders.
The European Court of Justice is set to rule on gender pricing – the practice whereby insurers partly base their premium costs on the sex of a policyholder. The case was brought by a Belgian consumer organisation, Test-Achats, which questioned the rule that allows "proportionate differences" in insurance premiums where sex is used a "determining factor".
Test-Achats argued that insurance and related products should come under the European Gender Directive, which prohibits discrimination on the grounds of sex. The court asked Advocate-General Juliane Kokott to give an opinion on the issue and, to insurers' dismay, she said last September that it was inappropriate to link insurance risks to a client's gender. If the court follows her lead and bans gender pricing, it will make it illegal for insurers to set premiums on the basis of someone's gender. The decision could cause motor insurance costs for women to soar. The Association of British Insurers said premiums for young female drivers could climb by an average of 25 per cent if the practice of offering them cheaper cover because they have fewer accidents was to cease.
"Insurers are likely to increase premiums across the board to the highest level," warned Katie Tucker, a lawyer specialising in insurance matters at at the firm Pinsent Masons.
The cost of life insurance and annuities would be similarly hit. At present, men get better annuity rates because they have shorter life expectancy than women. But they could lose that advantage if gender equalisation is introduced, warned Laith Khalaf, an analyst at Hargreaves Lansdown.
"Instead of annuity rates meeting half-way between the current higher levels for men and lower levels for women, they could simply sink to the female rate."