Car Crash Justice

Civitas, 3 March 2011

First the European Court of Human Rights (ECtHR), then the UK Supreme Court, now the European Court of Justice (ECJ); it seems that no court is free from attack. However, whilst the ECtHR should be criticised for its creeping expansionism, and the Supreme Court should not have been criticised at all, the ECJ’s latest ruling warrants rebuke for simply defying common sense.

The case that has sparked the most recent furore involves a Council Directive that seeks to implement “the principle of equal treatment between men and women in the access to and supply of goods and services”. When the Directive came into force in 2004, member states were allowed to opt-out of the prohibition on discrimination with regards to insurance on two conditions: firstly, they must “ensure that underlying actuarial and statistical data on which the calculations are based, are reliable, regularly up-dated and available to the public”; secondly, the situation must be reviewed by 21 December 2012.

A Belgian consumer association challenged the legality of this opt-out in the domestic courts, and the case eventually reached the ECJ. The Court held that, since the exemption had no “temporal limitation”, the derogation worked “against the achievement of the [Directive’s] objective”. Consequently, from 21 December 2012, the price of insurance premiums can no longer be influenced by considerations of gender.

The German Financial Times Deutschland has praised the decision as “right and understandable”; however the ruling has received near-universal scorn in the UK. Deriding the judgement as “nothing short of idiocy”, UKIP MEP Marta Andreasen has predicted that it will cause “the loss of many jobs”, and UK Conservative MEP Sajjad Karim denounced the decision as “pure folly”.

According to research by Open Europe, UK insurance providers will now have to find an additional £936 million in capital to cover themselves against the new market uncertainties, and industry leaders have openly admitted that these costs will be passed on to consumers. For the average 17 year old female driver, this will mean forking out an extra £4,300 in insurance premiums before she reaches the age of 26. Her male counterpart, however, will save £3,250 over the same period of time.

And it is not only drivers who will be affected. The ruling will also have significant ramifications for annuity rates, life insurance and private medical insurance. The Association of British Insurers has estimated that the decision will force men’s retirement income down by 8% and increase women’s life insurance by 20%.

So, given the inevitable and controversial results, why did the ECJ decide the case in this way? It certainly has something to do with rights, although quite what remains the subject of debate. If the judgement has plunged the insurance market into uncertainty, it has undoubtedly highlighted the muddled state of enforceable rights in Europe.

Within just a few paragraphs, the judgement refers to Art. 6 of the Treaty on European Union, the “principles” of respect for human rights and the rule of law “which are common to the member states”, the “fundamental rights as guaranteed by the ECHR”, and Arts. 21 and 23 of the EU Charter of Fundamental Rights. (Even if Britain’s opt-out from the Charter remains officially “untested”, its influence is certainly beginning to creep into previously uncharted territory.)

Yet, in amongst this tangled web of supposed rights guarantees, there is almost no discussion as to whether any right is in fact violated in this case. The maze of rights guarantees prohibits both direct and indirect discrimination. However, for one individual or group to be discriminated against in relation to another, their situation must be comparable. The ECJ accepts, largely without question, the assumption contained in the Directive that “the respective situations of men and women with regard to insurance premiums…are comparable”.

The point may be sound in theory; we shouldn’t allow insurers to discriminate between groups based on ethnicity or sexuality, so why should we allow them to make generic assumptions based on someone’s gender? Were men and women – particularly young drivers – equally as likely to have an accident, then charging them different insurance premiums based on their gender would be as wrong as paying them different salaries for doing the same job. But this flatly contradicts reality. Young men are categorically twice as likely as women to be involved in a car accident.

The Irish Times has slated insurers for using gender “as an excuse for mining profits”, arguing that “[n]ot all men go drag racing on the weekend”. Naturally, no generalisation will apply exactly to every member of a given group, but that does not mean that these broad statements have no practical application. That’s a matter for the actuaries – who, under the Directive itself, must justify their reasoning in a public and transparent way.

EU Commissioner for Justice, Viviane Reding, has welcomed the ruling as “an important step towards putting the fundamental right of gender equality into practice”, and has stated that removing the ability of insurance companies to distinguish between men and women is a sign of “modernity”. Gender equality is no doubt a fundamental right that deserves protection – however that does not mean that the different genders are always equal.