The ability of insurers to take into account factors such as age, sex and disability when assessing and rating insurance risks will be restricted under proposals contained in the recently published Equality Bill.
The Bill has been put forward by the UK government in response to a draft EU Directive published last year that sought to extend anti-discrimination legislation to non-employment related areas. To read our Law Now on the draft Directive click here.
The overall aim of the Equality Bill is to simplify the law on equality and, once enacted, it will significantly strengthen Britain's anti-discrimination legislation. The Bill is expected to come into force in Autumn 2010. The key proposals for insurers are:
Under the Bill it will no longer be possible for insurers to offer different levels to cover or premium on the basis of age, even with appropriate data.
In certain circumstances insurers will continue to be able to offer different premiums and benefits to disabled people, providing the information on which the decision is based is relevant and reliable.
For life insurance, annuities, accident insurance and similar types of cover, insurers will be able to calculate different premiums and benefits for men and women based on differences in gender, gender reassignment, pregnancy and maternity providing they rely on actuarial or other data from a source on which it is reasonable to rely. The data must be compiled, published and updated in line with Treasury guidance.
Existing policies at the date the law comes into force will be exempted from these provisions. On renewal, however, this exemption will no longer apply and insurers will need to consider any effect this may have on the terms of the policy.
Comment
Insurers are currently able to vary the premium and benefits of policies offered to different insureds (using age, disability and other factors to assess risk) but, when the Equality Bill comes into force, they will have to ensure that they only do so in accordance with the new law. The significant change for insurers is that age can no longer be considered when determining the premium or benefits of a policy. Research has shown that discrimination against the under 25s and over 65s in the availability and cost of some insurance products (mainly motor and travel) is commonplace . The new law will require insurers to disregard age entirely in assessing risk, which may result in an overall increase in premiums for certain products as insurers will not be able to tailor their policies according to higher risk age categories.
Insurers will already have made changes to the way gender is used to assess risk following the implementation of the Gender Directive last year. They should therefore have in mind the likely changes which will be required to their existing systems to allow them to assess disability, religion/belief and sexual orientation when this Bill becomes law next year. Age will have to be removed as a criteria for the assessment of risk altogether for new polices and renewals after the date of implementation.
Further Reading:Equality Bill and Explanatory Notes
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 15/05/2008.
