It is over a year since Court of Justice of the European Union (the “CJEU”) found in the Test Achats case that Article 5(2) of the Gender Directive (2004/113/EC) (the “Directive”) was invalid.  This provision of EU law allows EU Member States to derogate from the requirement of unisex insurance premiums and benefits where that derogation was objectively justifiable.  The CJEU decided that, as and from 21 December 2012, EU Member States could no longer derogate from the unisex rule. The decision applies to private and voluntary insurance, but not in circumstances where there is an employment relationship. 

With just under six months to 21 December 2012, there is little clarity as to when the necessary Irish legislative changes will be made and what those changes might be.  In the absence of such legislative changes, one source of information for Irish insurers is the European Commission’s (the “Commission”) guidelines on the application of the Gender Directive post-Test Achats. It should be noted, however, that these guidelines are not a legal interpretation of the decision.   

The CJEU decided that the unisex rule will only apply to “new contracts” concluded on or after 21 December 2012. The phrase “new contracts” has not been defined and therefore has caused some confusion.  The Commission’s guidelines outline that “new contracts” are:

• Contracts concluded for the first time as from 21 December 2012 and
• Agreements on or after 21 December 2012 to extend contracts concluded before that date which would otherwise have expired

According to the Commission, “new contracts” do not comprise:

• The automatic extension of a pre-existing contract without notice
• Adjustments to individual elements of a contract which do not require policyholder consent or
• Top-ups or follow-on policies by policyholders whose terms were pre-agreed in contracts concluded before 21 December 2012, though this will only apply to policies which are activated unilaterally by the policyholder

The Commission is of the view that limited forms of gender-related practices will still be possible. The use of gender in the calculation of premium and benefits on an aggregate level should still be permitted, provided this does not lead to a differentiation at individual levels. Insurers are also permitted to collect, store and use gender-related information for the purposes of reserving, internal pricing, marketing and advertising. The CJEU’s decision does not prohibit the use of other risk factors such as health status and family history. The Commission also considers that insurers can continue to offer gender-specific products which cover conditions exclusively or primarily of concern to one gender. Furthermore, where the use of apparently neutral risk factors (e.g. car-engine size in motor policies) indirectly discriminates against one gender, such indirect discrimination can be justified if the aim is legitimate and the means of achieving that aim are appropriate and necessary. Insurers may still use other risk factors not correlated with gender in the calculation of premiums and benefits, such as age and disability which are not currently regulated at EU level.

In Ireland, the Equal Status Act 2000 must be amended before 21 December 2012 to give effect to the CJEU’s decision and, as the clock ticks towards 21 December 2012, it is hoped that the necessary changes do not arrive too late in the day to allow insurers to properly prepare for the application of the unisex rule.    

For further information, please contact John Larkin or Aoife Farrelly of our Insurance and Reinsurance unit.

Contributed by Aoife Farrelly