UPDATED: European decision could increase life insurance costs

A decision tomorrow by the European Court of Justice (ECJ) on whether charging different premiums to men and women is against discrimination laws could have a significant impact on the UK insurance market and the premiums charged to customers on products such as car and life insurance.

The European Gender Directive prohibits discrimination on the basis of gender in relation to the supply of goods and services.  However, an article in the Directive gives individual countries the option to use differential pricing for men and women in relation to insurance products, provided it can be backed up with actuarial data.

The UK Government exercised this option so that the statistical differences could be accounted for in setting insurance premiums for men and women.

However, this has now been challenged as being inconsistent with equality of treatment and has been referred to the ECJ which is due to reach a decision on 1st March.

As women generally live longer than men they typically enjoy lower life insurance premiums.  On the other hand men tend to pay a little less for income protection and critical illness cover.

Should the ECJ decide that insurance premiums cannot differ due to gender, even where there is clear evidence of differing risks, the fear is that it could lead to higher insurance premiums for many of us and bring serious implications for the insurance industry overall.

UPDATE

The ECJ has ruled that gender should not be used in pricing of insurance products.  Equalisation of premiums should be implemented from 21st December 2012 so insurers will at least have some time to prepare for this.

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