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European Court of Justice gender ban is disappointing news for UK insurance customers says the ABI

The decision by the European Court of Justice (ECJ) to ban the use of gender in insurance policies from December 2012 is disappointing news. The insurance industry has fought against the possibility of this for the last decade and will now do everything possible to manage negative effects for customers. Before this judgment insurers were able to take gender into account when assessing a person's risk. Today's judgment means that insurers will be legally prevented from taking a person's gender into account when pricing insurance from December 2012.

The judgment will particularly affect products which take account of the risk differences between men and women such as motor insurance and some annuity products. For example, young female drivers pay less for motor insurance because they are less likely to have accidents and therefore women make fewer claims than men. For life insurance, women on average pay less to reflect their longer life expectancy, while pension (annuity) income for males is often higher because men typically have fewer years in retirement.

Maggie Craig, ABI's Acting Director General, said:

"This gender ban is disappointing news for UK consumers and something the UK insurance industry has fought against for the last decade. The judgment  ignores the fact that taking a person's gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance.

"Insurers will now study this judgment carefully to manage negative effects for customers. Insurers will work hard to ensure that the UK insurance market remains one of the most competitive in the world offering a strong choice of products and prices for customers.

"It will be crucial to ensure this news does not put people off having vital insurance that protects them against accident or illness, or provides an income in retirement. Insurance remains good value for people and not all customers will be equally affected as the use of gender can vary significantly between products and different companies. Each company will have to respond to the ban in the way they feel is in their customers' interests.

"Adaptation during this transition period until December 2012 will be challenging, but all insurers will be doing everything they can to ensure as smooth a change as possible for customers. Insurers will comply with the law and work proactively with the Financial Services Authority to ensure stability for the UK insurance market, its customers and investors.

" ABI-commissioned research by Oxera carried out in autumn 2010 highlighted the possible impact of removing gender from assessing risk:

• For motor insurance: women under the age of 25 could see an average rise of 25 per cent to their premium.
• For annuities: men approaching retirement could see an eight per cent reduction in annuity rates while rates for women approaching retirement could rise by six per cent.
• For life insurance: women could see a rise of as much as 20 per cent in the cost of cover, while men could see a fall of 10 per cent.

Over the next 20 months insurers will have to make large scale changes including amending all affected policy documentation; contacting  customers with new information; updating and changing computer systems; ensuring insurance brokers have the right pricing information; adjusting insurance renewals and updating all sales material.

Last updated 01/07/2016