Insurers urged to take part in gender pricing consultation

The Treasury is beginning a consultation on how gender could still be used to help insurance following the European Court of Justice’s ruling earlier this year.

The government said the ruling was detrimental to customers, but still had to be implemented. The government is keen for the insurance industry to get heavily involved in submitting its opinions to the consultation.

“There are… a number of legal issues around, in particular, the definition of a new contract and the circumstances in which it would remain open to insurers to make use of gender,’ the consultation document reads, according to City AM.

“The gender directive does not prohibit the use of sex as an actuarial factor; rather it says that this must not result in individual differences in premiums and benefits. This allows for the fact that insurers will need to collect data on gender and use it for the purposes of assessing the overall risk presented by a particular pool or pool of risks.”

James Rakow, insurance partner at Deloitte, said: “The European Court of Justice in March ruled that insurers could not use gender as a risk factor to price insurance premiums with effect from 21 December 2012. These changes will potentially have a huge effect on premiums for a wide range of policies including car insurance.

“Insurers will have to change their pricing models.  This is both an opportunity and a threat – those who already use state of the art technology and innovative sources of risk data may take this in their stride.

“Those who are disadvantaged by legacy systems and poor quality data may be left behind. In motor insurance this is also likely to lead to a speeding up in the adoption of telematics which will provide other valid criteria against which rating can be assessed.

“Clearly we will all have to wait for the results of the consultation to know just how challenging the ban will be for insurers”

Treasury secretary Mark Hoban said: “While nobody should ever be treated unfairly because of their gender, financial services providers should be allowed to make sensible decisions based on sound analysis of risk. 

“We continue to work hard with other member states and the [European] Commission to secure legal certainty for industry and reduce any detrimental effects for consumers.”