INSURANCE AND GENDER

Every now and then courts deliver a bombshell, that affects all of our lives. This week the European Court of Justice did just that.

The ECJ held that insurers cannot by law charge different rates for men and women, since this is discriminatory under E.U. law. This ruling, which takes effect from 21 December 2012 so that the insurance industry has time to adapt its pricing models, will have at least two wide effects. The first is that car insurance premiums, which are generally higher for men than for women, will equalise, either reducing for men and/or rising for women. The second is that annuities, a sort of pension, where, in return for a fixed sum of money, the pensioner receives a guaranteed income for the rest of his/her life, will also equalise, in general through giving men a lower annual income (since men live shorter lives, a lump-sum payment of £xx,000 currently gives them a greater annual income than women in the same position). These changes will affect milions of people across the whole of Europe.

This is not the first time that the ECJ has dropped a bombshell like this. Its 1990 ruling, in the famous case of Barber v. Guardian Royal Exchange, had similarly dramatic effects on occupational pension schemes. GRE ran a typical scheme, in which men retired at 62 and women at 57. On redundancy, scheme members could obtain an immediate pension income at 55 for men, and 50 for women. Mr. Barber was made redundant at the age of 52, and obtained normal statutory benefits; but, as a man, not the immediate occupational scheme income. He said that this was discriminatory, and went to court. The ECJ agreed. Although statutory schemes run by the Government, in which there was legislation and an element of compulsion, were held to be outside the relevant part of E.U. law, occupational schemes set up by companies were not. The consequence of the ECJ's ruling was the equalisation of retirement ages and pension benefits for men and women.

Which, on the face of it, is fair enough. Pension benefits such as the above are a part of worker compensation, and there is no reason why men and women should receive different compensation, if they do the same job. However, there is a big difference in my view between that position and the new ruling. Because it is demonstrably the case that men (particularly young men) are, on average, involved in more car accidents than women; and it is also demonstrably the case that men, on average, do not live for as long as women. Taking account of those facts gives more accurate pricing of car insurance and annuities for both men and women.

The ECJ has now rejected that argument. What this ultimately means, I feel, is that the easy parts of "equality" legislation have already been introduced, and that future changes will inevitably be more controversial. Equality, it turns out, is a slippery concept.

Walter Blotscher