Johannesburg - A landmark European Union court ruling this week has sent a frisson of fear through the SA insurance community.
The court found that UK insurers may not offer cheaper car insurance to women – even though extensive research shows that they are safer drivers.
The court also ruled that insurers can’t use gender when determining retirement annuity prices. This means men,,who tend to have shorter lifespans and paid lower rates,,will have to pay more in future.
Some industry experts think this could the beginning of an actuarial horror story - not being able to use “discrimination” among different groups to determine risk.
In South Africa, most insurers offer women lower rates – according to one large insurer, the average discount for car insurance is currently in the region of 10%.
This is based on empirical data that shows a marked difference in accident rates.
“We have statistical evidence that proves that women are involved in fewer accidents than men and, in respect of motor accident repair costs, the average repair cost involved in repairing an accident damaged motor vehicle that was driven by a woman is less than one driven by a man,” says Robyn Farrell, MD of 1st for Women Insurance Brokers.
Under the age of 35, men are much more likely to be involved in accidents, and their accidents are of a larger scale, says Christelle Fourie, MD of MUA Insurance Acceptances, a specialist underwriter owned by Hannover Re. By 35, the risk starts to level out.
When it comes to pension savings, there is also a big distinction between the annuity products for males and females in SA, according to one senior representative of a large life insurer. On average, though, women here only live a year longer than men. (In most Western countries it is more than three years, and in Japan eight years.)
Fourie thinks the local market may be affected by the European ruling. “While the ruling of the European Union is not binding on South Africa’s insurance industry, it is becoming increasingly apparent that foreign judgments carry persuasive authority, which influences the decisions of our courts and law makers.”
Should a party decide to take on a court battle in an effort to even out rates, it will take a number of years before a definitive ruling is made, she reckons.
But gender could only be the start. Fourie says in France there is already momentum to remove “age discrimination” in insurance policies.
In South African car insurance, there is clear historical data that shows how much higher the risk if a driver is under 25, says Danny Joffe, legal director of Hollard Select Brokers. Furthermore once drivers reaches the age of 55, their claims rate appears to drop as well.
He does not believe that SA should embark on the same road as the EU, and says that all indications are that government and law makers in the country understand that risk differentiating is based on extensive empirical data.
The SA constitution, which expressly prohibits all forms of discrimination, could provide some fodder in future law suits.
But Suzette Strydom, legal manager at the South African Insurance Association, says the constitution refers to the term unfair discrimination as opposed to some countries that only define the term discrimination.
In SA, the Promotion of Equity and Prevention of Unfair Discrimination Act of 2000 prevents and prohibits unfair discrimination, harassment and hate speech.
In order to defend an action of unfair discrimination, section 14 of this act states that discrimination reasonably and justifiably differentiating between persons according to objectively determinable criteria, intrinsic to the activity concerned, is a valid defence against a claim of unfair discrimination, adds Strydom.
She says this is reflected in local laws which have been drafted to allow differentiation, “resulting in benefits for consumers”.