Last week, the European Commission published its long-expected guidelines concerning the application of the Gender Directive (2004/113/EC) after the Test-Achats ruling of the European Court of Justice. As is well-known, the judgment provides that the use of different premiums and benefits for women and men in private insurance will no longer be allowed as of 21 December 2012. After the Test-Achats ruling, a couple of questions arose as to the application of the ruling on running contracts, the effects to the use of age and disability as a differentiation factor in insurance contracts and the effects on occupational pensions. The Commission's guidelines, as they were published last week, are not binding upon the Member States, but are of particular value for answering the questions that could not be solved on the basis of the wording of the Gender Directive or the Test-Achats ruling itself. They can also generate a legitimate expectation that the Commission will adhere to the policy approaches as they were set out in the guidelines.
Unisex premiums only for "new contracts"
Most important conclusion is that the Commission considers the unisex rule only applicable to new contracts, concluded after 21 December 2012. This issue had been under a lot of discussion. Some were of the opinion that the binding unisex character of premiums and benefits should only apply to running contracts, while others, such as consumer organization Test-Achats, were of the opinion (and still are) that running contracts would also be affected by the Court's ruling. The European Commission now clearly takes position, referring to the concern it already expressed in the preamble to the Gender Directive, i.e. to avoid a sudden readjustment of the market.
Interestingly, the guidelines give specific examples of what is considered "a new contract". The commission proposes that the concept of "new contracts" should be uniformly applied throughout the European Union, so that equal premiums and benefits are guaranteed from the same date.
It is important to note that the Commission also indicates what it does not consider a "new contract" and hence, should be perceived as an existing contract to which the unisex rule does not apply (unless a Member State, such as Belgium, already included a prohibition on the use of different premiums and benefits for certain contracts, like e.g. non-life insurance contracts in Belgium). This means that pre-existing contracts which are automatically extended, are not perceived as a new contract. The same goes for adjustments made to individual elements of running contracts, such as (lawful) premium changes on the basis of predefined parameters, where the consent of the policy-holder is not required. Specifically with respect to life insurance products, the Commission finds that "the taking out, by the policy-holder of top-up or follow-on policies whose terms were pre-agreed in contracts concluded before 21 December 2012, where these policies are activated by a unilateral decision of the policy-holder" can also be designated as a new contract in the meaning of the Directive. The Commission hereby gives the example of an insured person who wishes to increase the amount invested through a life insurance product. Also the mere transfer of an insurance portfolio can not be considered a "new contract", so that these contracts may in principle also continue to use different pricing for women and men.
Gender-related insurance practices which remain possible
The guidelines further give examples of gender-related insurance practices that remain compatible with the unisex rule and that are not influenced by the Test-Achats ruling of the European Court of Justice. These include the calculation of technical provisions, the pricing of reinsurance products (as long as they do not lead to gender differentiation at individual level), the use of marketing and advertising targeted at either men or women and the use of differentiation factors such as family history of breast cancer or waist hip ratio, which can impact differently on tariffs paid by women and men. In annex 3 to the guidelines, reference is also made to the accepted use of gender-specific application forms and medical tests, as well as to their interpretation in the underwriting of risk. Additionally, the Commission considers that it remains possible for insurers to offer gender-specific insurance products to cover conditions which exclusively or primarily concern males or females (such as prostate or breast cancer).
Use of age and disability
The guidelines also refer to the use of age and disability as risk-rating factors and to the proposal for a Directive that is currently discussed by the European institutions (COM(2008)426), allowing for insurance pricing on the basis of age and disability. The Commission perceives this exception as an expression of the idea that incomparable situations should not be treated the same or that, in spite of comparability, there is an objective justification for treating them differently. This would imply that two persons of a different age are not in a comparable situation with regard to life insurance, if the differences of treatment would at least be proportionate and based on a sound risk assessment. This very provision is for this reason not perceived as a derogation from the principle of equal treatment, and thus a transitional period would not be necessary in order to be compliant with this principle.
Occupational pensions
The Commission is now confirming that the Court's ruling in the Test-Achats case has only implications for insurance contracts that are covered by the Gender Directive and not for insurance and occupational pensions that are offered in the employment relationship and to which the employer is a party. As far the latter contracts are concerned, reference is made to Directive 2006/54/EC, containing provisions that indicate under which conditions the use of actuarial factors differing on the basis of sex, should and should not be considered discrimination.
Further monitoring by the Commission
The Guidelines finally stress that the Commission will organize strict monitoring of the necessary adaptations to their national legislation before 21 December 2012. The Commission also declares to remain vigilant for possible unjustified rise in prices attributed to the Test-Achats ruling and thereby declares to pay particular attention to possible violations of competition law.
