Age-based underwriting under threat

Insurers also face a murky future in dealing with the European Court of Justice's decision to outlaw gender based underwriting on discrimination grounds, the practice added.

COVER previously reported that French body Halde was seeking to prevent discrimination in terms of gender, age and health Europe-wide.

And writing in the May issue of the Association of Financial Mutuals' newsletter, representatives from Pinsent Masons warned that age could be the next factor to be targeted by a similar process to that of gender.

Bruno Geiringer, partner and Amie O'Neill, trainee solicitor at the firm, said: "Although the gender judgment does not have a direct impact upon insurers' reliance on any other characteristics, there are concerns that the use of age in assessing risk is likely to be challenged in the future.

"Age is not currently specifically protected against discrimination under EU or UK law in the provision of services, however, a draft equality directive proposal focusing on age and containing an almost identical insurance opt-out to that used in respect of gender is due to go before the European Council in June of this year.

"Following the ECJ decision in Test-Achats, there is a risk that the opt-out will be removed from the draft," they added.

With regard to the gender ruling, Geiringer and O'Neill suggested that polices expired by 21 December 2012 (when the ban comes into force) would not be challenged and that non-reviewable policies are likely to avoid coming into contact with the judgment, but those policies reviewed periodically may need to be re-priced in accordance with the new regime.

"Contracts entered into before then, where premiums and/or benefits paid or payable, or contingently payable, are to be paid before this date are unlikely to be the subject of a successful challenge as a consequence of this ruling," they said.

"Although domestic legislation in the UK has not been finalised, it is anticipated that, where premiums have been agreed at the time of entry into the pre-21 December 2012 contract, they will not have to be re-priced and the benefits under the policy will not have to be re-set, as a result of this ECJ ruling.

"However, there is a degree of uncertainty in respect of the payment of premiums and/or benefits under contracts concluded pre-21 December 2012 which are subject to review after 20 December 2012. It is likely that the incoming domestic legislation will require the insurer to re-price such premiums and benefits on a gender-neutral basis," they added.

The pair also highlighted the need for insurers to write policies that enabled rates to be raised in the future when necessary while maintaining the ethos of Treating the Customer Fairly and stressed that proxies to gender based decisions would not be allowed.

"Consequently, insurers are encouraged to draft policy documents in a way which enables them to raise future premiums of the more favourably treated gender to whatever is deemed a gender neutral rate.

"Without these contractual protections insurers may be forced to bring the more favoured gender rate in line with the less favoured gender rate resulting in huge losses.

"Using gender or direct proxies for gender in providing insurance premiums and benefits will be unlawful and insurers also need to avoid relying on additional factors in the underwriting process which may constitute indirect discrimination," Geiringer and O'Neill added.

They noted that piece was not intended to be legal advice.

• Tweet  
• Facebook  
• LinkedIn  
• Send to  

• Topics
• uncategorised
• European Court of Justice
• gender discrimination
• Ageism