Insurance & the Equality Act: Why we need to get it right

The release on 7 July 2021 ofDP21/2:Diversity and Inclusion in the financial sector - working together to drive change, a discussion paper jointly authored by FCA, Prudential Regulation Authority (PRA) and Bank of England that sought views on the regulators' plans to improve inclusion and diversity in financial services - clearly signposted that 'D&I' is now both a regulatory and ESG issue that the senior managers of firms, both small and large, now need to firmly have on our agenda.

The joint regulators believe that increased diversity and inclusion will advance their statutory objectives as a result of improved governance, decision-making and risk management within firms, a more innovative industry, and products and services better suited to the diverse needs of consumers, particularly those who are vulnerable.

As the former Cabinet Office Disability and Access Ambassador for the Insurance Industry and Profession, plus also the Banking Sector, I share this view. This why I support pan insurance industry inclusion and diversity initiatives, such as iDAWN (Insurance Disability Awareness Network), iCAN (Insurance Cultural Awareness Network) and GAIN (Group for Autism, Insurance and Neurodiversity) and the IFoA Mental Health Working Group.

Central to recent regulatory vulnerable customer guidance and Duty of Care consultation papers, as well as Government Disability and Autism strategy and consultation announcements, is the Equality Act 2010.

Whilst a great deal has been published in relation to insurance recruitment and the Equality Act, there is value in improving our general awareness of the Act and day-to-day insurance considerations.

This was highlighted on 2 February by the Money and Mental Health Policy Institute, which raised concerns regarding financial services firms' compliance with the Act and, importantly, it's anticipatory duty.

The Equality Act and insurance

Applying to all employers and service providers in businesses of any size, the Equality Act exists to protect people from discrimination. It applies to all individuals including employees, job applicants, contract workers and the self-employed, amongst others.

Discrimination is the act of treating someone less favourably because of a protected characteristic.

Such characteristics include:

• Age
• Disability - A person has a disability if they have a physical or mental impairment which has a substantial and long-term adverse effect on that person's ability to carry out normal day-to-day activities.
• Gender reassignment - The process of transitioning from one gender to another.
• Marriage and civil partnership - Marriage is a union between a man and a woman or between a same-sex couple. Same-sex couples can also have their relationships legally recognised as 'civil partnerships'. Civil partners must not be treated less favourably than married couples (except where permitted by the Equality Act).
• Pregnancy and maternity - Pregnancy is the condition of being pregnant or expecting a baby. Maternity refers to the period after the birth, and is linked to maternity leave in the employment context. In the non-work context, protection against maternity discrimination is for 26 weeks after giving birth, and this includes treating a woman unfavourably because she is breastfeeding.
• Race - Refers to the protected characteristic of race including a group of people defined by their race, colour, and nationality (including citizenship), ethnic or national origins.
• Religion or belief - Religion refers to any religion, including a lack of religion. Belief refers to any religious or philosophical belief and includes a lack of belief. Generally, a belief should affect your life choices or the way you live for it to be included in the definition.
• Sex - Gender.
• Sexual orientation - Whether a person's sexual attraction is towards their own sex, the opposite sex or to both sexes.

Intersectionality and protected characteristics
When considering protected characteristics, it's essential to be conscious of intersectionality as consumers and colleagues, friends and family can exhibit a number of characteristics.

Insurance and protected characteristics
It may sometimes be possible for an insurance business provider to refuse cover to someone or offer cover on different terms because of disability, sex, gender reassignment, or pregnancy and maternity. As an insurance business provider, it must be able to show that there is a difference in risk associated with one of these protected characteristics.

Discrimination
Discrimination can manifest in different ways: Direct discrimination is more overt mistreatment, due to a protected characteristic; indirect discrimination occurs when someone is disadvantaged by a rule or requirement, which initially appears to be neutral and non-discriminatory, but inadvertently is.

An example of this may be where services or purchasing options are only made available online, which could disadvantage a blind person. It's also important to note that the Equality Act applies even when a product and/or service is free.

What does this mean for the insurance industry?

Insurance firms rely on huge amounts of data and information to inform their risk selection and pricing. How, then, can this need to assess risk be balanced with avoiding both direct and indirect discrimination? Is there ever a time when it's both legal and appropriate to use personal characteristics to inform an insurance product's availability and price?

In short, the answer is yes.

The law accepts that some exceptions may apply regarding disability, sex, gender reassignment and pregnancy and maternity. For example, an insurance provider is allowed to consider a disability as an influencing factor where the insurance risk may be greater as a direct result.

This could influence the terms on which the policy is presented, or even result in a policy not being offered. However, an insurer is forbidden from instigating a blanket policy where the terms are uniformly decided for disabled people, or refused altogether, as this would directly contravene the Equality Act.

Additionally, wherever an insurance provider chooses to refuse cover based on an exception, it must be able to demonstrate there is a difference in risk associated with the protected characteristic in relation to the product.

Since 2012, it's been illegal for insurance companies to discriminate on the basis of gender. Prior to this date, the general trend was for female drivers to be offered lower car insurance premiums, but the Court of Justice of the European Union (CJEU) ruled that this would no longer be allowed, since it was a breach of discrimination law.

Despite this ruling, statistics have shown that men still pay more on average for their car insurance than women, with a 2017 report from Confused.com citing a gap of £114 in women's favour*. It has been proposed that men's higher premiums may arise due to a preference for certain vehicle types and/or occupations.

Age has historically been another deciding factor for insurance offices and is still permissible in certain circumstances, but again an insurer must base their decision on risk assessments from a reliable source and ensure this risk relates to the product or service being offered. A customer may challenge where they believe that this is not the case.

Insurance and disability

This is highly relevant with both the Government's new National Strategy for Disabled People and a Disability Green Paper consultation recently launched.

Providers of insurance advice and solutions can only justify treating disabled people (including people with a past disability) differently when providing them with insurance if:

• the different treatment is by reference to relevant information from a source on which it is reasonable for you to rely, and
• it is reasonable for you to treat the person differently.

This means it is important to have relevant information from a reliable source when making decisions about offering insurance services to a disabled person. Using untested assumptions, stereotypes or generalisations can lead to unlawful discrimination.

For example: Someone who was previously a disabled person because of a mental health condition is charged a higher premium for travel insurance because of a blanket exclusion policy, even though they have not had any recurrence of their condition for many years.

The insurer does not have any information that the person's past condition involves a particular risk now. It is unlikely the insurer will be able to show that the different treatment is based on relevant information from a source on which it is reasonable to rely, and that it is reasonable to treat the person differently because of their past disability. Unless it can demonstrate this, the insurer must not charge higher premiums or refuse them insurance altogether.

A disabled person being treated for cancer applies for a life insurance policy. The insurance provider refuses the application on the basis of a medical report from the person's doctor, which makes it clear that the prognosis is as yet far from certain. This decision is based on relevant information from a source on which it is likely to be reasonable to rely and it is also likely to be reasonable to treat the disabled person differently because of it. 

Continuous professional, as well as personal, development

Insurance firms and colleagues may wish to consider the financial and reputational repercussions of a discrimination claim or legal action being brought against them.

The best way to safeguard against such an event is to comply with the guidelines of the Act and for organisations to ensure that they take every step to treat customers and employees fairly, equally and respectfully.

The world is changing rapidly, our population is ageing and becoming increasingly diverse, with an increasing number of people living with health conditions and/or disabilities. This, together with an increasing focus from companies on employee wellbeing, plus initiatives on equality, inclusion, diversity, intersectionality and access, individually and collectively make understanding and complying with the Equality Act ever more important and an essential element of our continuous professional, as well as personal, development. 

*Confused.com 2017