Gender equality
March 4, 2011
The European Court of Justice in Luxembourg has ruled that insurance companies should not differentiate between men and women. In the future, both groups will pay the same premiums, even if their risks are different.
Until now, men have paid higher premiums for car insurance since, statistically, they have more accidents. Women, on the other hand, pay more for health insurance and pensions, due to their higher life expectancy.
This has been possible under the EU equality law, introduced in 2004. It has allowed insurance companies to differentiate between men and women when calculating insurance premiums if data showed that “sex is a determining factor in the assessment of risk.”
A Belgium consumer group, however, has successfully challenged the ruling, filing a lawsuit with the Belgian Constitutional Court, which, in turn, asked the European Court of Justice to rule on the issue.
Interfering with risk calculation
Numerous insurance companies across Europe are not happy with the court's decision, to put it mildly. At the heart of their criticism is the argument that only like should be treated as like – namely that men and women aren't equal when it comes to calculating risk.
"With this decision, a central tenet of the private insurance business is being questioned: the equivalence of premiums and benefits," said Jörg von Fürstenwerth, director of the German Insurers' Association.
Women's monthly premiums for full health coverage at German insurance company Ergo, for instance, are 30 to 50 euros higher than those for men. The reason is simple: higher life expectancy. Not only do women live longer but older people, in general, require more intensive health later in their lives.
Whether the ruling will cause premiums to rise is unclear. Opinions vary.
The European insurance and reinsurance federation CEA expects that consumers will face significant additional costs. Germany's Union of the Insured (BdV), by contrast, doesn't expect overall costs to rise. The insured will, after all, still require the same amount of healthcare, it argues.
Equal but more expensive
If, however, average premiums should rise, that increase would serve only to maximise profits for insurance companies rather than compensate risks, BdV argues.
Insurance companies see plenty of risk heading their way, given their general practice of having people with a higher risk pay a higher premium. "Men are simply cheaper for a health insurer," said a Ergo spokesperson. "If we simply averaged the payments for men and women, we would not be prepared in the future if more women signed up for health insurance here."
Insurance companies may begin to increase premiums to create a buffer. But none are willing to comment on how rates could increase until the ruling has been turned into law and they have recalculated their premiums.
"One thing is clear, the ruling has made insurance more expensive," Markus Riess, CEO of German insurance giant Allianz, said in the "Euro am Sonntag" magazine.
The court's decision is set to go into force at the end of 2012. By then, insurers will need to have adjusted their premiums and eliminated all inequalities.
The European Court of Justice's decision raises the question of whether a second pillar of equal treatment, no age discrimination, will also have to be applied to the insurance industry. In that case, the necessary adjustments would be much more far-reaching than those for gender.
Author: Annika Reinert
Editor: John Blau