The third reading of the Equality Bill before the House of Lords takes place today and the Bill is expected to receive royal assent shortly. In a recently published Policy Statement the Government Equalities Office (GEO) confirmed that an exception to the blanket ban on age discrimination in the Bill will be introduced by way of secondary legislation which will come into force at the same time as the new law (2012).
Following a period of consultation (with comments from the ABI and Aviva, amongst others), the GEO has now proposed that insurers will still be able to use the age of an insured as a factor in determining the risk and calculating the premium to be paid, provided it is related to risks or costs associated with age and it is "fair and reasonable" to do so. This threshold will be met where, for example, statistical data can show that varying the premium in accordance with the age of the insured fairly reflects the varying risk profiles of different age groups. The GEO has confirmed that insurers will be required to publish data on some products (as yet unspecified) to support the difference in premiums, in a similar way to the system in place under the new gender legislation.
The GEO has said that the following will be valid reasons for treating customers differently on the basis of their age, provided it is done in a fair and reasonable way:
- the lack of reasonably available data;
- market specialisation;
- the need to maintain an acceptable risk profile; and
- the need to keep costs down for consumers as a whole.
By way of example, age bands that keep costs down for customers as a whole will be permitted in the pricing of insurance, so long as they are based on appropriate data about risk. At present, the GEO has not given any further guidance as to what these reasons will mean in practice.
The creation of the "fair and reasonable" exception appears to be in direct response to representations made to the GEO during the consultation process and will be welcomed by insurers. Insurers can continue to take the age of an insured into account, but they will breach the prohibition if it can be shown that it was not fair and reasonable for them to do so. Insurers offering motor, travel or health insurance products should have little problem in continuing to use age as a factor, as there is robust statistical data to justify setting different premiums and benefits based on age.
Further Reading: Equality Bill: Making it Work - Ending age discrimination in services and public functions (GEO Policy Statement January 2010)
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The original publication date for this article was 23/03/2010.
