In March 2011, the European Court of Justice ruled that, with effect from 21 December 2012, the use of gender as a risk factor by insurers should not result in individual differences in premiums and benefits for men and women (see our previous blog post here). The Government has expressed its disappointment with the judgment, believing that financial services providers should be allowed to make sensible decisions based on sound analysis of relevant risk factors, but is nevertheless required to implement the ECJ’s judgment.  The Government proposes to achieve this by way of amendment to the Equality Act 2010.

On 8 December 2011, the Government published a consultation document on its proposed approach to implementing the judgment and its views on how insurers can use gender as a risk factor in the light of the judgment.

In the Government’s view:

  • The judgment only applies to contracts for insurance and related financial services entered into on or after 21 December 2012. Any contracts with gender-sensitive pricing of premiums or benefits concluded before that date can continue unchanged after that date.
  • The effects of the judgment are likely to fall upon consumers by an initial and marked net increase in the cost of premiums with (generally more careful) female drivers subsidising the cost of insurance for (generally less careful) male drivers. Although competition in the market will adjust prices back down, the Government expects that the market will stabilise with premiums at a higher level overall than they were before 21 December 2012.
  • The industry will also be affected if the lowest-risk categories of consumer begin to leave the market or take a lower level of cover, affecting revenues for insurers. In addition, as the industry implements the change, it is likely to incur transitional costs.

The Government is seeking views on its impact assessment, its legal interpretation and the accompanying draft regulations to amend the Equality Act 2010.

Click here to view the press release announcing the consultation and click here to view the consultation document itself. The consultation ends on 1 March 2012.