ECJ rules for equal treatment in insurance case

The European Court of Justice ("the ECJ") has today published its decision in the case of Association Belge des Consommateurs Test-Achats ASBL and others.

The decision invalidates from 21 December 2012 the provision of EU law which currently enables insurers to charge differential premiums or provide differing benefits depending on the sex of the policyholder.

Although the case is specific to contracts of insurance, it will also be of some interest to pension schemes for the reasons mentioned later on in this alert.


The background to the case lies in the Treaty on European Union ("the Treaty") and a 2004 European Directive ("the Directive").

The Treaty (read in conjunction with the Charter of Fundamental Rights) lays down the principle of non-discrimination in very broad terms, including non-discrimination on grounds of sex. The Directive focuses on non-discrimination in the provision of goods and services, with a view to putting this principle of equal treatment into effect in Member States.

The case arises from a derogation  ("the Derogation") set out in the Directive. The Derogation is specific to insurance and related financial services, and allows Member States to permit:

"proportionate differences in individuals' premiums and benefits where the use of sex is a determining factor in the assessment of risk based on relevant and accurate actuarial and statistical data".

The Derogation then goes on to say that Member States which rely on the Derogation should review the position on 21 December 2012 (i.e. five years after the Directive first came into effect).

Belgium and the United Kingdom have availed themselves of this Derogation in national legislation.

Association Belge des Consommateurs Test-Achats ("Test-Aankoop") is a Belgian consumer organisation which has brought this action (along with two private individuals), seeking to have the Belgian national law declared unconstitutional in so far as it relies on the Derogation. This raises the question of whether the Derogation itself is compatible with the terms of the Treaty, and it is this issue which has been referred to the ECJ.

ECJ's decision

The ECJ has recognised that the Derogation can serve a proper purpose as a holding measure, by giving insurers a transitional period in which to move to unisex terms. The Court's longer-term concern about the Directive, however, is that although it requires Member States to reconsider their position on 21 December 2012, there is nothing in it to prevent Member States from relying on the Directive indefinitely.

The ECJ has therefore ruled that, in the insurance services sector, the Directive will be invalid from 21 December 2012 as infringing the Treaty's prohibition on discrimination on grounds of sex.

Pension schemes

It seems inevitable that the decision will have some impact on the costs of purchasing annuities from an insurance company and insuring death benefits for members. Exactly how this will affect a particular pension scheme is difficult to judge, except to say that currently annuities are generally more expensive to secure for women (because they tend to live longer) while death benefits are more expensive for men (for the same reason). How a switch to unisex rates would affect a given scheme will depend on the benefits to be secured and scheme's respective proportions of males and females.

A separate issue concerns the actuarial factors which a scheme itself uses for converting a member's normal retirement pension into some other payment (such as an early or late retirement pension, a transfer payment to another scheme, or a retirement lump sum). Many schemes still use factors here which differentiate between men and women, and the ECJ's 1993 decision in Neath v Steeper confirmed that this does not contravene the principle of "equal pay for equal work" where the differences are consistent with the basis on which the scheme is funded by the employer. Today's decision does not overturn the reasoning in Neath v Steeper, but it is an area that we are continuing to monitor closely.

If you have any questions, please contact Elke Duden ( +32 3 203  63 69) or your usual Linklaters contact.