Brokers warn Treasury of ECJ decision’s ‘unintended consequences’

Legal experts have warned that UK insurers could face a wave of compensation claims from male policyholders if the European gender ban on insurance pricing is overturned in a widely anticipated ruling next month.

The European Court of Justice is due to rule on 1 March on whether insurers can set different rates for women and men.

As Insurance Times went to press, Biba was set to hold eleventh-hour talks with the Treasury over fears that the ruling could lead to large costs and administration upheaval.

Top lawyers have warned insurers that the decision could be declared retrospective by the ruling ECJ judge.

Law firm Clyde & Co partner Andy Tromans said: “If this ruling applies retrospectively, it is possible that policies that have been written were done on the wrong basis. That would potentially leave open the scope for people to claim against the industry.”

Clyde & Co’s discrimination specialist, Nick Elwell-Sutton, said claims could be brought against the industry from 2004 onwards, when the EU’s Gender Directive was enforced by European law.

The decision could also be ruled to take effect immediately, meaning that insurers will need to change policies by 2 March.

However, insurers will be pinning their hopes on a recommendation by advocate-general Juliane Kokott in her 30 September opinion that insurers be given a three-year transition period.

An ABI spokesman said: “We have advised our members that it would be prudent and sensible to establish now what the potential implications could be for their customers and business.

“We have no figures on the cost to the industry, because it depends on the terms of the judgment, and individual insurers will need to work out what their own exposure would be.”

Tromans expressed concern that gender-based insurance business models, like Sheila’s Wheels, may be affected if gender-specific policies are banned.

Tromans said insurers had the options of either lowering male premiums to match female levels, or upping female premiums and benefits to the same level as males.

Biba was due to raise brokers' concerns with Treasury mandarins on Wednesday.

Biba’s head of corporate affairs Graeme Trudgill said: “There are all sorts of unintended consequences for brokers, including costs for software houses to make changes, difficulties with renewals not being valid, and arguments over quotes not being guaranteed.”

The AA British Insurance Premium Index shows that the average motor insurance premium for men aged 17-30 is around £2,045, while the average for women of the same age bracket is around £1,275.