All insurance contracts written after 21 December 2008 are subject to the provisions of the EU Gender Directive (2004/113/EC) which extends the principle of equal treatment between men and women to the supply of goods and services.
The Gender Directive regulates the basis upon which premiums and benefits under an insurance policy can be set by reference to the sex of the insured and prevents insurers from treating women less favourably on the grounds of pregnancy or maternity.
From 5 April 2008 the exemption for certain types of insurance policy which allowed potentially discriminatory treatment, was tightened up significantly. Prior to the implementation of the Gender Directive in the UK the provisions of what is now section 45(1) of the Sex Discrimination Act 1975 applied. These permitted otherwise discriminatory treatment by reference to actuarial or other data provided it was reasonable to distinguish customers by their sex and apply different premiums. The data did not have to be published or regularly updated and there was no clarification of what “other” data might include.
The Gender Directive has resulted in a much more stringent requirement, now set out in section 45(3) of the Sex Discrimination Act 1975. In order to justify differences in premiums and benefits between men and women, data used must be accurate actuarial and statistical data which is compliant with standards published and updated regularly in accordance with guidance issued by the Treasury. The concept of “other data” sources has now disappeared. Any ultimate differences in the premiums and benefits available to men and women must be “proportionate” to this data.
Whilst many of the issues relating to the publication of such data have been resolved by the option of statistics being published collectively (for example by the ABI for non life and the CMI for life) there are still some questions in relation to these requirements. For example, what exactly does “proportionate” mean and how frequently should published data be updated? Treasury Guidance issued in March 2008 states that “proportionate” in this context implies some tolerance around the premium differential. The guidance also seems to acknowledge that it is possible to take into account the effect of other risk factors which are relevant to determining premiums or benefits on an individual basis. The guidance concludes that proportionality is therefore unlikely to be expressed as a clear linear relationship.
As for regular updating, the requirement is to update in accordance with Treasury Guidance. This sets out guidelines for updating data relevant to different types of business (e.g. four years for life and three years for motor insurance) but only “if necessary”. Exactly when new information will necessitate a change to collectively published data will involve a degree of judgement.
The final piece of the jigsaw (at least for the moment!) is to be added for insurance contracts issued after 21 December 2008. For new contracts after that date the insurance exemption will not permit “costs” related to pregnancy or maternity to result in differences in individuals’ premiums and benefits. This requirement is implemented via Section 45 (3)(a)(iv) of the Sex Discrimination Act 1975. Arguably “costs” in this context covers any difference in premium or benefits that anticipate possible additional costs of claims for pregnancy related illnesses or incapacity. “Maternity” for these purposes includes women who have had a baby in the last six months. It would seem that the exemption cannot therefore be used to pass on any additional costs of pregnancy or childbirth to women only and that such costs will need, going forward, to be spread across policyholders as a whole. This is consistent with the EU Gender Directive (paragraph 20 of the preamble) which states that: “less favourable treatment of women for reasons of pregnancy and maternity should be considered a form of direct discrimination, based upon sex and therefore prohibited in insurance and related financial services. Costs related to risks of pregnancy and maternity should therefore not be attributed to the member of one sex only”.
It is worth remembering that the ability to refuse cover to a female (or male) on grounds of their sex is limited to products that are provided only to members of the opposite sex in relation to risks which only affect that sex.
Clauses excluded or delaying payment on grounds of pregnancy and maternity are reasonably common in life and health insurance contracts, and firms have been busy amending their contracts in order to comply. But now that the 21 December deadline has passed that does not mean that firms can relax. Coming into view is the proposed Equality Bill potentially bringing in similar requirements in relation to age discrimination. A topic for another day!