Discrimination in the Insurance Industry – Driving Inequality

The Equality Act 2010 was dubbed ‘Labour’s biggest idea for 11 years’[1]. The idea was to to ‘reform and harmonise equality law’[2] which, at the time, was fragmented into 9 large pieces of legislation[3]. The act included the protection of nine characteristics including age; disability; gender reassignment; marriage and civil partnership; pregnancy and maternity; race; religion or belief; sex; sexual orientation.[4]. Despite these ‘comprehensive’ measures to protect discrimination based on these characteristics, there is evidence to suggest this sort of discrimination is very much alive and having financial consequences for millions of consumers of insurance. Using gender, race and age as examples it will be established how this is still happening, albeit under the radar.

 

Despite sex being a ‘protected characteristic’, under the provisions of the Equality Act 2010 schedule, 3 it was initially permitted that insurance companies (amongst other financial institutions) would be able to use gender as a means to determine insurance premiums[5]. This later changed, however, after a case originating in Brussels was brought to the European Court (Association Belge des Consommateurs Test-Achats ASBL and others) the  Advocate General Juliane Kokott concluded that the “use of risk factors based on sex in connection with insurance premiums and benefits is incompatible with the principle of equal treatment for men and women under European Union law”[6]. It therefore became illegal, as of December 2012, for insurance providers to discriminate based on gender[7]. This was not without its controversies. A report published by the Comite Europeen des Assurances responded: “As far as insurance is concerned, the directive, though well-intended, will not achieve its objective, and will end up harming those it is meant to help. Banning the use of objective and relevant data such as gender will adversely affect fair insurance prices and could well lead to a rise for both men and women.”[8]. Retrospectively, this assessment was far from accurate. Reports show that men – who had previously paid £27 more than women in 2012 – are now paying an average of £101 more[9]. Reasons for this are unclear, but the implication is that whilst insurance companies are no longer discriminating on gender directly, they could be doing so indirectly through the use of filtering names, for example – which are not a protected characteristic.

 

Similar trends are found with race. Despite race being heavily protected by EU legislation in the ECHR[10] and Equality Act 2010[11], it has been found that the use of names typically associated with particular ethnic groups result in higher premiums[12]. If this is an accurate representation of how insurance companies are discrimination via proxy so-to-speak, they are still acting contrary to legislation. Associative discrimination is when “a person is treated less favourably due to their association with another” and this was included in the Equality Act 2010[13]. This ought to protect individuals who appear to be discriminated against based on a perceived association with a group, so the question remains as to why this hasn’t been explored in the courts as of yet. Former Chair of the Equality and Human Rights Commission, Trevor Phillips has said that “What people in the insurance sector don’t seem to have grasped is the risk they are running here”[14], so it’s clear that this potential ‘legal storm’ has not gone un-noticed. This may well be applicable to cases of associative discrimination for gender too, if it is indeed proven that insurance providers are using alternative means to discriminate based on gender.

 

Further to this, routine discrimination based on age in order to set insurance prices should follow from the precedent set in Test-Achats. Despite being permitted in the Discrimination Act 2010[15], the principle of incompatibility with EU discrimination law is no different[16]. It is therefore possible that insurance companies in the UK are not acting in compliance with EU regulation, and consumers are being unfairly discriminated against despite this.

In Review

Clearly, more research is needed to ascertain exactly how insurance companies are using consumer data. Where there is very little transparency, this is difficult to achieve. It is however clear that current common practise amongst insurance companies is at the very least precarious and likely to have consequences in the near future. Observing just 3 of the 9 protected characteristics and their role in the insurance industry — gender, race and sex — discrimination appears to be occurring regularly, albeit indirectly. Legal consequences may well be on the radar in the near future.

Bibliography

[1] Toynbee P, ‘Polly Toynbee: Harriet Harman’s Law is Labour’s Biggest Idea for 11 Years’ (the Guardian, 13 January 2009) <http://www.theguardian.com/commentisfree/2009/jan/13/polly-toynbee-harriet-harman-social-mobility> accessed 11 February 2018.

[2] Equality Act 2010

[3] ‘Equality Act 2010’ (no date) <https://www.tameside.gov.uk/equalityact2010> accessed 11 February 2018.

[4] Equality Act 2010

[5] Equality Act 2010 Schedule 3 Section 5

[6] Advocate General’s Opinion in Case C-236/09 Association Belge des Consommateurs Test-Achats and Others

[7] ‘Q&A: Insurance Gender Ruling and You’, BBC News (21 December 2012) <http://www.bbc.co.uk/news/business-12608777> accessed 11 February 2018.

[8] ‘Insurance and the Discrimination Laws – PDF’ (no date) <http://docplayer.net/7987898-Insurance-and-the-discrimination-laws.html> accessed 11 February 2018.

[9] Collinson P, ‘EU’s Gender Ruling on Car Insurance Has Made Inequality Worse’ (the Guardian, 14 January 2017) <http://www.theguardian.com/money/blog/2017/jan/14/eu-gender-ruling-car-insurance-inequality-worse> accessed 11 February 2018.

[10] ECHR

[11] Equality Act 2010

[12] Kretchmer H, ‘Insurers “Risk Breaking Racism Laws”’, BBC News (9 February 2018) <http://www.bbc.co.uk/news/business-43011882> accessed 11 February 2018.

[13] Andrews G, ‘Plotting the Boundaries of Associative Discrimination’ (2010) 21 European Business Law Review 573.

[14] Kretchmer H, ‘Insurers “Risk Breaking Racism Laws”’, BBC News (9 February 2018) <http://www.bbc.co.uk/news/business-43011882> accessed 11 February 2018.

[15] Discrimination Act 2010

[16] Advocate General’s Opinion in Case C-236/09 Association Belge des Consommateurs Test-Achats and Others

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