Age discrimination and insurance
This guide was last updated on 23rd July 2008
In June 2008, the UK Government announced plans to outlaw
unjustifiable age discrimination in the provision of goods,
facilities and services, including insurance.
The move is part of a complete overhaul of the UK's
discrimination laws, which have developed piecemeal over the
last 40 years. The Equalities Bill will streamline current
legislation into a single Act covering all areas of discrimination,
including race, disability, gender, sexual orientation and age.
As part of this process, the Government proposes to broaden the
scope of current age discrimination law beyond the workplace to the
provision of goods and services. Details of the new rules will be
set out in secondary legislation following a consultation exercise
planned for 2009.
The initiative reflects provisions in a new anti-discrimination
directive being proposed by the European Commission, which would
prohibit direct or indirect discrimination outside the workplace on
the grounds of religion or belief, disability or sexual
orientation.
Evidence
The Government has identified healthcare and financial services
– particularly insurance - as areas where there is "significant
evidence" that age discrimination is taking place.
Launching the Government's "Framework for a Fairer Future" on
26th June, Harriet Harman, Secretary of State for Women and
Equality said:
"Many people still seem to think it's acceptable to discriminate
against someone because they are older. It's not. And with the
number of people over 85 set to double over the next 20 years – it
makes no sense. People are not over the hill at 60 to be either
refused insurance or discriminated against in healthcare".
In April 2008, a joint policy briefing by Help the Aged and Age
Concern found "extensive evidence that older people experience age
discrimination when trying to obtain insurance cover – especially
for motor and travel".
The charities' research found that many insurers operate upper
age limits for insurance cover, or impose sharp increases in
premiums for consumers who are over a certain age, even if there is
no increase in risk. The knock-on effect is that older people are
dissuaded from travelling, driving or hiring a car or taking part
in activities such as voluntary work.
The charities acknowledge that some older people may present an
unacceptably high risk, but this is because of their health or
their claims history, not because of their age alone. "We do not
want to stop insurers making fair commercial decisions, as long as
these are not based on arbitrary assumptions about age".
The report also noted that older people are less likely to be
able to shop around for the best deal online. According to a 2007
survey by OFCOM, only about 40% of those aged between 65 and 74
have internet access and only about 25% of people over
75.
Justifiable
The Equalities Bill will not, however, prevent "actuarially
justified age-based treatment in areas such as financial services,"
according to the Framework document. The key issue for insurers is
what will be deemed justifiable.
One option is for the rules to follow a similar approach to that
taken on the use of gender information.
Under the Sex Discrimination (Amendment) Regulations (which came
into force on 6th April this year) insurers can still offer
different premiums and benefits to men and women, but only if the
difference is based on relevant and accurate actuarial or
statistical data compiled, published and regularly updated in
accordance with Treasury guidance and the difference in treatment
is proportionate.
Some insurers, however, believe new laws are not the answer to
age discrimination. Responding to the Framework document on 26th
June, Nick Starling, Director of General Insurance and Health at
the Association of British Insurers, commented:
"Legislation, no matter how well intentioned, could have the
unintended negative consequence of forcing some insurers to
withdraw certain products altogether, reducing competition and
availability and pushing up prices for all age groups.
"Insurance for older people is available from a range of
providers…However we recognise that some people may need more help
to find the most appropriate insurance polices for them. We
are working to improve this and we know that the Government and age
charities will support our efforts in this area."
For the present, the Government has set up a working group of
interested parties to consider where age discrimination is taking
place in the provision of financial services and the possible
impact of legislation. The group will submit a final report by the
end of September 2008.
European proposals
On 2nd July 2008, the European Commission adopted a proposal for
a new directive aimed at providing protection outside the workplace
from discrimination on grounds of age, disability, sexual
orientation and religion or belief.
The draft directive has a broad remit, covering the provision of
social services, healthcare, education and housing as well as
access to and the supply of goods and services, including
insurance.
The proposal, however, includes a special rule for insurance and
banking services in recognition of the fact that age or disability
can be an essential element in the assessment of risk for certain
products and, therefore, the price.
The draft rule provides "in the provision of financial services,
member states may permit proportionate differences in treatment
where, for the product in question, the use of age or disability is
a key factor in the assessment of risk based on relevant and
accurate actuarial or statistical data".
CEA, the European insurance and reinsurance federation, welcomed
the concession but has concerns that the Commission's proposals
will reduce availability and restrict affordability of insurance
products.
“The CEA firmly opposes unfair discrimination and supports the
EC’s efforts to ensure that all EU citizens are treated fairly,”
said CEA Director General Michaela Koller.
"However, if the proposed restrictions are placed on insurance
it will have the opposite effect to that which the Commission
intends. These legal restrictions on risk-equivalent calculations
must be avoided to ensure that insurance pricing is adequate,
reasonable and fair.”
The CEA is "strongly in favour of a direct, risk-based exemption
for insurance so that a fully integrated and harmonised EU market
for insurance is created, ensuring certainty for both consumers and
insurance providers".
The Commission's proposal will have to be passed by the European
Parliament and the Council of Ministers before it can come into
force. Once passed, member states will have two years to implement
it into national law.
In the meantime, the Commission says it will be having further
discussions with the insurance and banking industries and other
relevant stakeholders to obtain a greater understanding of the
areas where age or disability are relevant factors in the design
and pricing of products.
Contact: Katie Tucker (katie.tucker@pinsentmasons.com
/ 020 7667 0116)
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