Taking the gender of the insured individual
into account as a risk factor in insurance contracts constitutes
discrimination," the European Court of Justice said on Tuesday.
The
ECJ told insurers to adopt a "unisex" approach to setting premiums from
December 21, 2012, confirming a recommendation from its senior adviser
in September.
Insurers said the
decision could push up motor insurance costs for women, who currently
pay less than men because they are statistically less likely to be
involved in accidents, by up to 25 percent.
The
ruling could also reduce retirement annuity payments to men, who
currently get more than women to take account of their lower average
life expectancy. Annuities are insurance policies which offer a regular
income for life in return for a lump sum, usually paid on retirement.
INDUSTRY ANGER
The
ECJ's decision drew condemnation from the industry, which said
differential pricing for men and women was legitimate given their
different risk profiles.
"Europe-wide
the effect on the price and benefits and on the choice of insurance
products for consumers could be significant," said the CEA, Europe's
insurance industry lobby, which added it was "deeply disappointed" by
the ruling.
Analysts said the decision would have little long-term impact on insurers' earnings as they had enough flexibility over pricing to ensure any changes would cancel each other out.
"From
the consumer perspective it is going to make a difference, but my sense
is that the insurers will change their rating to maintain their current
level of profitability," said Espirito Santo analyst Joy Ferneyhough.
The Stoxx 600 Europe insurance sector share index .SXIP was flat at 1420 GMT, lagging the wider market .FTEU3, which was up 0.2 percent.
AGE NEXT ?
The
gender ruling could pave the way for a potentially more damaging legal
challenge to insurers' reliance on their customers' age in setting
prices and payouts.
"Of greater
concern to the industry is the likelihood there will be further European
challenges, particularly around age," said Mark Winlow, head of general
insurance at accountants KPMG.
"This is a more significant factor than gender, as age is used much more widely to differentiate risks."\
Younger male drivers can pay as much as 2000 percent more for car insurance than they would if they were aged 50, Winlow said.
Sheila's
Wheels, a British motor insurer that markets itself to women drivers,
said its business would be largely unaffected as a low volume of claims
from its mostly female customer base allowed it to maintain a low gender
price gap.
"We are protected by the sheer number of women on our books, which will not change overnight," a spokesman said.
"The decision will not change our advertising or marketing or dilute our appeal to women."
Analysts
said insurers were likely to look for ways of measuring customer risk
more accurately, including pay-as-you-drive schemes which set car
insurance prices by monitoring customers' driving habits through a
"black box" fitted inside their vehicles.