Should we all pay the same?

19 March 2011 - 16:47 By Brendan Peacock

Could a European Union ruling on gender discrimination change the way we are insured?

In a ruling that has sent shock waves through the European short-term insurance industry, the Court of Justice at the European Union declared that, from December 2012, insurance companies would not be allowed to offer cheaper car insurance to women on the basis of their gender, since it constitutes a form of sex discrimination.

Naturally, in the South African market, local insurers are worried about a similar trend, which could result in female drivers paying as much as 50% more to insure their cars, while men's premiums would be unlikely to budge.

But is a similar ruling in SA likely?

Robyn Farrell, MD of 1st for Women Insurance, said it was not likely in the immediate future.

"We believe that for this matter to be motivated here, it would require an interested or aggrieved local party to bring the matter before the courts. In terms of who would be against it - female motorists and the entire insurance industry.

"For the industry as a whole, it would mean a change in risk-rating structures, since the entire insurance industry differentiates in terms of age, gender, geography, years of insurance and licence period, for example," said Farrell.

"Of course, it is not fair. At the end of the day, women are a lower insurance risk, and we have statistical evidence that proves that women are involved in fewer accidents than men. In respect of motor accident repair costs, the average repair cost involved in repairing an accident-damaged motor vehicle that was driven by a woman is less than one driven by a man. This is further supported by statistics in the UK showing that the cost of the average car claim by an 18-year-old man was £4400, while that for an 18-year-old woman was £2700. In SA, the cost of the average car claim by an 18-year-old male is R11997, while that for an 18-year-old woman is R8668."

Christelle Fourie, MD of MUA Insurance Acceptances, said that while the SA insurance industry often followed trends originating in Europe, it was difficult to predict an outcome, especially since a new move in France could see European insurers taken to task for being ageist as well.

"Foreign judgments carry persuasive authority, which influences the decisions of our courts and lawmakers. In addition, we do have to conduct business in line with the values enshrined in our constitution, which prohibits unfair discrimination. Technically, the industry is ageist too. Gender and age tend to go hand in hand - young males pose the highest risk, while over the age of 35 there isn't much difference between men and women. So we give discounts to older customers with lower risk profiles.

"The constitution says not to discriminate on factors beyond our control, like race or gender. It will require a lot of debate, because it's not just a legal issue, it's a moral dilemma too. The issue would need to be tested by our courts, and that would be a long and drawn-out process. It took years for the EU to reach this ruling. Insurance is inherently based on risk discrimination - there are good and bad risks, which is not the same as wholesale discrimination against a group. The outcome, if it were to happen in SA, would not be good for consumers. Early indications are that the US insurance industry will not go this route. As far as we know, the EU is the only territory to make such a ruling," added Fourie.

"The industry is sophisticated in its rating factors now - in the old days, the better risks would be subsidising the poorer risks, but now we have sophisticated models that price risk correctly. A ruling like the EU's would shunt us back to the old system of those who are high risk making a smaller contribution to the pool than they should, and vice versa. I'd like to think we wouldn't have to do away with our very successful differentiated pricing model."

Constitutional law expert Pierre de Vos felt a challenge to the status quo in SA law would be unlikely. "Our jurisdiction on equality is different from that of the EU in that our primary focus is not on treatment, but the impact or effect of legislation. If the effect is to perpetuate a stereotype or unproven assumption, then it will not be allowed. However, if statistics can show a factual difference, especially if it works in favour of a group that is traditionally disadvantaged - such as women - then there should be no problem."

De Vos added: "Is it fair or unfair to make such a distinction? If it disadvantages a group who are usually disadvantaged to begin with, then it would be difficult to justify. You have to balance who is disadvantaged versus who is advantaged by the status quo, so if those who were traditionally advantaged come off better, then the weight is against such a situation, unless there is a strong purpose behind the law. For example, there is a law against blind people obtaining a driver's licence. Blind people are disadvantaged, but there is clearly a good reason for this law. In the case of sex discrimination in insurance, women are known to be a more vulnerable group, so the fact that the discrimination works in their favour means I'd be surprised if anything changes."