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Car Insurance EU Discrimination Law – Why it should NOT effect car insurance premiums one iota

Continuing on from the previous article.

“Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination,” the European Court of Justice ruled.

According to this article, this mean car insurance for women in the UK are set to rise.

The Guardian goes one step further with this in-depth article on the law

In summary the Guardian article says this

The outcome therefore is that from 21 December 2012, the exemption for car insurance premiums will end, and they will no longer be able to take gender into account as a means of setting the price.

In short, the European Court of Justice do not understand the definition of the word discriminaiton, or they do, in which case their ruling does not affect car insurance.

The Guardian hournalist writes this

The 2004 directive made clear that it applied to direct as well as indirect discrimination on the basis of gender. This is a legal distinction which is well-known to English lawyers. Direct discrimination means treating someone less favourably than others on the basis of a protected characteristic, such as gender or race. For example, telling an employee that “all women are stupid”. Indirect discrimination is when a policy has a disproportionate effect on a protected group, and cannot be justified. For example, requiring that a person had 25 years of experience or more to qualify for a job may be indirect age discrimination. But it may be legitimately justified as the job is complex and needs someone with experience.

So he is on the ball. In short discrimination is only when someone is treated less well arbitrarily, ie for no good reason.

The EU directive states this

The use of actuarial factors related to sex is widespread in the provision of insurance and other related financial services. In order to ensure equal treatment between men and women, the use of sex as an actuarial factor should not result in differences in individuals’ premiums and benefits.

Which can obviously be proven to be wrong by any insurance company possessing enough data. This makes the directive irrelevant as it is based on a faulty premiss.

The Guardian article then goes onto explain how the court understood that the premiss could be faulty but it was powerless not to use this premiss in car insurance. ie common sense got its coat and left the building.

The court went on to discuss, briefly, whether car insurance premiums for men and women were in fact comparable with each other. This is important, as discrimination law requires that people in protected groups (for example, men and women) are treated equally but only in situations where the treatment of those groups can truly be said to be comparable. So, for example, it could never (well, probably never) be discriminatory for men to restricted in accessing maternity services as compared to women.

In this case, the council argued that that the cases were not comparable:

The council expresses its doubts as to whether, in the context of certain branches of private insurance, the respective situations of men and women policyholders may be regarded as comparable, given that, from the point of view of the modus operandi of insurers, in accordance with which risks are placed in categories on the basis of statistics, the levels of insured risk may be different for men and for women.

However, the court’s view was that its hands were tied. The directive itself clearly considers the situation to be comparable, as it provides a specific exemption for exactly that situation:

Accordingly, directive 2004/113 is based on the premiss that, for the purposes of applying the principle of equal treatment for men and women, enshrined in articles 21 and 23 of the charter, the respective situations of men and women with regard to insurance premiums and benefits contracted by them are comparable.

The Guardian article wraps up

So, is the ruling bonkers? From a legal perspective, not very. It is difficult to see how the court could have looked beyond the clear intention of the directive (directives are, after all, all about intentions) to eventually include insurance premiums in gender equality rules.

On this, the author is completely wrong, from a legal perspective it is difficult to see how the court could NOT have looked passed the intention of the directive given that it is based on a faulty premise ie there is solid factual evidence that women are less risky than me.

The article then comes out with some socialist nonsense

as pointed out in the Irish Times, the ruling may in fact make things fairer all round. It should not be forgotten that, fairly unusually, it is young men who are being discriminated against in this market:

Insurers love citing the “boy-racer” factor, but the truth is there has been little transparency when it comes to insurers’ calculations of the “loadings” applied to men’s premiums. The ECJ ruling today means insurers will no longer be able to use gender as an excuse for mining profits from either male drivers or, crucially, from female pensioners.

The key factor that the Irish Times overlooks is the fact that there is competition in the market making it all but impossible for young drivers to be  gouged without good reason.

The socialist tendencies continue

The decision may ultimately lead to insurers charging more for insurance, as suggested by three different people quoted in a Financial Times article. It may not.

It may not? Okay so even though the cost of insurance claims will be stay approximately the same next year, all things considered, he is saying that it is possible for car insurance premiums for women to stay the same, for the cost of mens insurance to decline while still paying out the same amount of claims?

Of course this is nonsense. If men have to pay less to balance the costs with women, then insurance premiums for women will have to increase. I hope I am not labouring the point here.

So in summary, the ruling by the European Court of Justice is based on a premiss which it acknowledges is faulty.

The council expresses its doubts as to whether, in the context of certain branches of private insurance, the respective situations of men and women policyholders may be regarded as comparable, given that, from the point of view of the modus operandi of insurers, in accordance with which risks are placed in categories on the basis of statistics, the levels of insured risk may be different for men and for women.

The Court has then ignored this key fact and continued to pass a law which is based on something which is does not even agree with. This is madness.

This sums up the situation nicely

As well as involving Europe’s increasingly unpopular and possibly unelectedjudges, the ruling affects an interest group – insurance companies – with deep pockets and who are capable of sophisticated lobbying.

Unelected bureaucrats, so they have no skin in the game when it comes to doing the right thing, ie they keep their job no matter what, and then you have the lobbyists, and lets not kid ourselves here, you need to be a massive company to be able to afford to use high paid lawyers to manipulate the political process. So we are talking big business working with unelected politicians ie fascism

Taking these 2 key facts into consideration, you have to assume that this law is to serve one purpose and one purpose only, and that is to increase insurance premiums for everyone and to increase the profits of big insurance companies.

I mean the little guy does not have a chance. The only way the public has a voice is through democracy, the voting in and out of politicians that represent or do not represent thier interests. But in Brussels we have unelected politicians which means the people have no voice.

The only voice that the law makers hear comes from the businesses that are big enough to have a precence in Brussels.

When you look at it from this perspective there is no way that this law can be good for consumers. It is just one more hurdle to put in the way of new companies wanting to break into a market that is not being served in a suitably advanced way.

By eliminating one of the key factors in insurance pricing the European Court is eliminating one factor that small companies can use to compete with the existing industry giants.

Summary continued

The ruling comes down to the fact that the court has said that there is no logical reason for gender to be taken into consideration when pricing a car insurance premium.

There clearly is.

I would challenge any insurance company out there that has access to sufficient data to prove this to take their case to the European Court of Justice, if they were to find themselves on the end of a claim due to this faulty law.

I can see no way they would lose, assuming of course the judges at the European Court of Justice take into consideration facts, which is no guarantee given that they have not done so when they have passed this law.

Either the judges have completely missed the point or they have chosen simply to ignore the point. Whatever the case may be, any challenge to this law needs to show the mistake make in directive directive 2004/113 point 18 

The use of actuarial factors related to sex is widespread in the provision of insurance and other related financial services. In order to ensure equal treatment between men and women, the use of sex as an actuarial factor should not result in differences in individuals’ premiums and benefits.

The author of the article highlighted that the judges thought their hands were tied when clearly they were not.

Directive 2004/113 clearly states

The purpose of this Directive is to lay down a framework for combating discrimination based on sex in access to and supply of goods and services, with a view to putting into effect in the Member States the principle of equal treatment between men and women.

So “the use of sex as an actuarial factor should not result in difference in individuals premiums and benefits” if it is discriminatory.

I agree with that, I am sure you would to, however if the use of sex to calculate an insurance premium can be proven to not be discriminatory then there is no reason for sex not to be used to calculate premiums.

Directive 2004/113 is set out to ONLY deal with discrimination. ie people getting treated less well for no factual reason, so any decisions with regards to the supply of products or services that are based on facts are simply not covered by this directive hence the title of the article and why this should not affect insurance premiums in the UK that are based on factual actuarial data.

This is a neat sum up of the judgement

http://curia.europa.eu/jcms/upload/docs/application/pdf/2011-03/cp110012en.pdf

And it confirms my opinion, the title being

“Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination”

Discrimination can only occur when a decision to treat someone less fairly is not based on fact. As long as it can be shown with hard facts that women are a lower risk than men, and that the pricing of insurance policies in general are based on statistical evidence, they are simply not covered by this directive/law.

This directive is intended to  eliminate discrimination, nothing else.

This is the definition of discrimination

Wikipedia

Moral philosophers have defined discrimination as disadvantageous treatment or consideration. This is a comparative definition. An individual need not be actually harmed in order to be discriminated against. He or she just needs to be treated worse than others for some arbitrary reason.

Free Dictionary definition of arbitary

1. Determined by chance, whim, or impulse, and not by necessity, reason, or principle: stopped at the first motel we passed, an arbitrary choice.
2. Based on or subject to individual judgment or preference: The diet imposes overall calorie limits, but daily menus are arbitrary.

In short the news stories saying this is going to shake up the insurance market are blowing the situation out of all proportion, the reality is, as long as car insurance premiums are calculated on statistical evidence then this law will have no effect. http://www.telegraph.co.uk/motoring/news/8354618/Sheilas-Wheels-claim-insurance-ruling-is-unfair.html#

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