The debate between insurers and their ‘right' to assess risk against public policy concerns about unethical discrimination has come into sharp focus again with the European Court of Justice's (ECJ) ruling on gender discrimination.
These debates always take place on two levels. Firstly, on a technical risk assessment one, on whether insurers can prove that any particular group of people is at greater risk than another. Secondly, on an ethical one, as to whether it is acceptable to discriminate against a particular group per se. Consensus is easy at each end of the spectrum - discrimination against smoking is fine, on race it is not.
Between these two extremes, things are resolved by some form of accommodation between the two, as happened in the UK on genetic tests. Prior to the ECJ's ruling, it seemed that this was the case for gender, too.
To find out what went ‘wrong', we need to look at how we got to the current situation. The ruling originated from a dispute in Belgium where its high court had to decide if it was compatible with the fundamental rights of the EU to take gender into account as an insurance risk factor. At first glance, the answer would be ‘no' because the Gender Directive states that the use of sex as a factor in the calculation of premiums and benefits for insurance is not allowed.
But Article 5(2) of the Directive, not present in the European Commission's initial proposal for the Directive but added later during the legislative process, gives countries the right to ‘opt out' from the principle of equal treatment. To do this, they had to prove that the use of sex as a determining factor in the assessment of risk is based on relevant and accurate actuarial and statistical data. This is exactly what many countries did - including the UK and Belgium.
Despite this, the ECJ ruled that different insurance premiums for women and men constitute sex discrimination and are not compatible with the EU's Charter of Fundamental Rights, adding that the opt out clause in the Directive was illegal.
But hang on a minute. In this case, the opt out was contained in the Directive itself, which specifically addressed one of those fundamental rights - surely that should be OK?
Maybe. But it is arguable that it isn't, and given that the Commission issued a ‘fundamental rights checklist' last October to make sure all laws proposed comply with the EU Charter, it is certainly not in the current direction of travel. To nail the issue down for good, the EU Justice Commissioner said: "It is important to note that the derogation for insurers was not part of the Commission's initial proposal for the 2004 Directive. It was only added later by the Council." In other words, it was contrary to the essence of the original Directive. The same argument could be applied in the UK when an amendment to an Act is contrary to what was said in the explanatory notes to the original Act.
There has been a lot of talk about a daft decision by the ECJ - although other coverage in the UK media has actually supported the principal of equal treatment for the sexes on insurance on ethical grounds. In fact, the pass was sold long ago when the original Directive did not recognise any alternative argument.
The lesson for future potential equality Directives is get in early and don't rely on later lobbing to gain concessions.
Richard Walsh is a director and fellow of SAMI Consulting, www.samiconsulting.co.uk
