May 1st, 2012

Continental European Legislative and Judicial Trends: France - Does the Prohibition of Discrimination in the Insurance Industry Conflict with the Principle of Equality?

Posted at 1:00 AM ET

David Lewin, Managing Director


The CJEU has continually shown its commitment to fight discrimination and just took another step in that direction. In a judgment delivered on March 1, 2011, in the case of Tests-Achats (Belgian consumers association) versus Belgium, the court found that Article 5 of Council Directive 2004/113 allows member states to maintain an exemption in the insurance field from the rule of unisex premiums and benefits without a time limitation and that this exemption is incompatible with the principles established by the European Charter of Fundamental Rights (ECFR), namely equality between men and women and non-discrimination on the grounds of gender.

The ECFR directive forbids any discrimination on the grounds of gender in the access to and supply of goods and services. It does, however, authorize exemptions to the rule of unisex premiums and benefits, provided that they are based on “relevant and accurate actuarial and statistical data.”

Although the directive provided for a review of member states’ use of the Article 5 exemption five years after December 21, 2007, the court considered that there was a risk that the exemption from equal treatment of men and women would be permitted indefinitely and that such exemption is contrary to the aim of equal treatment. Consequently, the court decided that the exemption should become invalid effective December 21, 2012.

Strict equality between men and women is now required in the insurance industry, and it matters little that gender is a determining factor in assessing risk. Uniformity must preside.

This judgment was delivered in accordance with the conclusions of the Advocate-General, Juliane Kokott. She considered that it was legally inappropriate to determine insurance risk on the basis of the insured individual’s gender. According to her, individual differences linked to gender only in a statistical sense should not lead to different treatment of insured individuals based on their gender. Furthermore, she stressed that gender is a characteristic that is inseparable from the person of the insured individual - as is the case with race and ethnic origin. Essentially, the person has no influence over this characteristic.

While other objective factors - for example, lifestyle, environment or professional activity - may play a key part in assessing insurance risk, discriminating on the grounds of gender would not. According to Advocate-General Kokott, discrimination takes away the possibility of guaranteeing “that different insurance premiums and benefits for male and female insured individuals rely exclusively on objective criteria.”

Comparable or Different Situations

To apply the principle of equality, a central question must be asked: Regarding the insured risk, can it be known if women and men are in comparable or different situations?

According to CJEU case law, the principle of equality of treatment requires that comparable situations not be treated differently and that different situations are not treated equally, unless such treatment is objectively justified.

In the case of December 16, 2008, Arcelor Atlantique et Lorraine et alia, C-127/07, Rec. p. I-9895, point 23, the court alluded to the question of comparability between men and women. It indicated simply that “Directive 2004/113 is based on the premise that [...] the respective situations of women and men with regard to insurance premiums and benefits contracted by them are comparable.”

While this premise is not questionable, the reasoning seems to be somewhat simplistic regarding the directive providing an exemption from the principle of unisex premiums and benefits. The levels of insured risk are likely to be different, statistically at least, for women and men.

Eliminating the difference in prices and benefits based on gender will affect all lines of insurance, including retirement, health, welfare and life insurance. In the case of life insurance, only statistics make it possible to measure the uncertain part of the policy, namely the date of occurrence of the “loss” (death).

This recent application of the principle of gender non-discrimination for “repartition” scheme pensions shows that the 1978 Council Directive 79/7/CEE on implementing equal treatment for men and women in matters of social security took into account all aspects of insurance coverage. The CJEU’s October 20, 2011, decision confirms this directive’s validity. In that decision, the court specified that Article 3(1) of Directive 79/7/CEE “must be interpreted as meaning that an annual pension adjustment scheme such as that at issue in the main proceedings comes within the scope of that directive and is therefore subject to the prohibition of discrimination laid down in Article 4(1) of that directive.” Today, it is required that the aggregate of payments of annual pension adjustment schemes (repartition pension) be the same for males and females.

Notably, the European judge did not rule that capitalization type pensions were within the scope of this directive. Unlike repartition pensions, capitalization pensions are based on the sum of money given by the insured. Other criteria, such as gender, are therefore irrelevant.

The need for gender equality was one of the reasons why the French repartition pension regime was altered. Before the system was reformed, mothers were given additional contributions when a child was born. This measure was contrary to the EU principle of non-discrimination. Consequently, the November 2011 reform of the pension system ensured equality between father and mother in terms of extra paid leave when a child is born.

Reaction to Tests-Achats Decision

The insurance industry strongly criticized the CJEU’s March 1, 2011, Tests-Achats decision. The Fédération Française des Sociétés d’Assurance (FFSA) felt that the decision challenged a key principle of insurance - that insurance must be based on segmentation of the population in order to determine a price of insurance based on the insured risk. The FFSA opinion draws attention to the fact that the consumer’s interest is in purchasing insurance at the best price, which is a premium calculated according to the insured risk and determined from actuarial factors.

In its determination to fight against any form of discrimination, the CJEU delivered a decision that is not only contrary to the interests of consumers, but also far from the French notion of equality. According to Article 6 of the Declaration of the Rights of Man and of the Citizen of 1789, all citizens are equal before the law “without distinction other than that of their virtues and their talents.”

The CJEU decision also goes against French legislation that used the exemption from the principle of equal treatment for one or more types of insurance business. For the purposes of Article L 111-7 of the Insurance Code, the exemption is invoked so that “[t]he Minister in charge of the economy may, by decision, authorize differences in premiums and benefits which are based on taking gender into account and proportionate to the risks when relevant and accurate actuarial and statistical data establish that gender is a determining factor in assessing the insurance risk.”

If this provision has not been subject to the control of the Constitutional Council, there is a likelihood that, if this had been the case, it would not necessarily have been censored by the nine constitutional judges.

The difference in treatment between men and women in the insurance industry seems to be in line with the case law of the Constitutional Council. “The principle of equality does not prevent the courts either from ruling differently in different situations or from exempting equality for reasons of general interest, provided that, in both cases, the
difference in treatment resulting from this is directly related to the purpose of the law that establishes it” (for example, Constitutional Council 2009-578 DC, March 18, 2009).

Furthermore, the principle of non-discrimination is not established by the French Constitution. (For the opposing view, see Félicien Lemaire’s notion of non-discrimination in French law, RFDA 2010, p. 311.)

The EU political organs are not in agreement with the French regarding the concept of non-discrimination. These political organs have been under significant pressure from insurance company lobbies and the public alike.

The European Commission Declaration of January 13, 2012, on the principal application of the Directive 2004/113/ CE reflects a level of agreement between the European Court and the Commission. Indeed, in the Declaration, the Commission considered CJEU’s decisions, in particular, the Tests-Achats decision. The Commission endorsed the court’s views, announcing that after December 21, 2012, no insurance coverage may index prices based on the gender of the customer.

With this communication, does the Commission want to announce a “doomsday of discrimination” between men and women beginning on December 21, 2012?

We may question the trend in our modern societies to prohibit recognition, admittedly discriminating, of virtues, merits and talents and to impose, conversely, “positive” discrimination when these same virtues, merits and talents struggle to emerge.

However, this decision may be an indirect means of pressing for the development of Article 16 of Directive 2004/113 and, consequently, of strictly women’s insurance in the name of “promoting [...] the interests [...] of women.”

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