A challenge by a Belgian consumer group Test-Achats to the exemption from EU equality law for the insurance industry when calculating insurance premiums has today been successful in the European Court of Justice. The ECJ ruled that gender can no longer be taken into account as a risk factor in insurance because it constitutes discrimination.

Women have statistically been regarded as ‘safer’ drivers in comparison to men, particularly young women compared to young men. Women’s premiums have therefore been cheaper as they are considered to be less of a risk. Now, insurance premiums for women are likely to rise as a discount cannot be given based on gender.

The ruling not only affects car insurance but also pension annuities. Women historically received a smaller pension from the same amount of money than a man because they statically live longer. Annuity rates for men may therefore be reduced in line with those of women.

The requirement to take gender out of the equation will not come into force until 21 December 2012 to allow insurers time to adjust their systems. It is too early to say what the real effect will be. Insurers may look at alternative methods of assessing risk based on other information captured as part of the initial quotation. Some insurers have also been investigating telematics which is a system whereby information on driving styles, time and distance is captured and fed back by a ‘black box’ fitted into the car. Insurers will need to be careful to avoid indirect discrimination in any new system that they use.

This ruling also means that other factors used by insurers to calculate premiums which are subject to discrimination legislation, such as age and disability may be successfully challenged in the courts. Insurers may wish to take this into account when devising their new systems.