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INTRODUCTION
21.12.2012: one date, one prophecy, the end of world for the umpteenth
time. If you are reading these lines actually our old earth is still spinning as
usual (and I am pretty confident about this
1
). But, no matter if you are believers
or not in apocalyptical scenarios, that date for sure will bring a change
somewhere in the world. This change will take place in the field of financial
services, in particular in the world of insurance, pushing to an end a consolidate
way to price many kind of contracts. Indeed, in the whole European Union, it
will not be possible to price insurance policies differently for men and women, in
both life and non-life sector. The last and definitive step toward this ending has
been the so-called “Test-Achats Judgment” in March 2011, a ruling that set up
to 21.12.2012 the deadline for pricing those products as it was in the past. But
the whole process actually started long before.
In the first Chapter of this short paper the phases that led to this ruling
are explained, along with the analysis of the sentence itself. The main reasons
of this new unisex pricing will be explained underlying why this change has to
be made. In the second Chapter it will be reported a summary of possible
impacts and consequences for life sector coming from different good
authorities, getting little bit more in depth for the possible evolution of two
products: term life insurance and annuities. Last but not least, in Chapter 3 it
will be brought to the reader’s attention a practical example on how the Test-
Achats ruling has been faced by one of the most important insurance company
for its array of annuity products. Then, all the ties born in these Chapters will be
gathered together in the conclusion Chapter, in particular giving an answer to
the main question arising since the idea of a possible gender banning for
pricing insurance policies started to circulate: is this ruling actually something
fair?
For answering to this question it will be shown in Chapter 2 in which way
mortality is related to gender and if it is possible to find other kind of variables
able to express the mortality expectations in the same way (or even better).
Then all these reasoning will find a little bit more technical application in
Chapter 3, looking at the annuities on an actuarial perspective. For the most
part of this paper I tried to keep the writing as simple as possible in order to be
comprehensible also for those who could not have strong knowledge in
insurance field, but for Chapter 3 some technical skills are required. Anyway I
provided some hints and references on the most important actuarial tools and
methodologies used in the Chapter so that actually also this part should be as
accessible as the others. All the elaborations, unless where noted, were made
1
This thesis has been completed couple of days before December , the 21
st
, 2012
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during my internship in Allianz Italia, at actuarial department for life sector, new
products development office
2
, using Excel spreadsheets.
2
I would like to seize the opportunity here to deeply thank Dott. Masetti and everyone in his working staff for the support
given to me in terms of knowledge, explanations and patience during the months of my internship.
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CHAPTER ONE - THE TEST-ACHATS JUDGMENT
1.1 ON GENDER EQUALITY: THE ROAD TO TEST-ACHATS JUDGMENT
Equality is a fundamental principle at both European Union and National
level, supported, over the years, by powerful human rights argumentations
3
.
During the last decades the European Union has extended the principle of
equality, in particular the equality for sexual gender
4
, applying it at first in the
domain of the workplace and then to an increasing number of different areas.
The principle of equality for gender was introduced for the first time in the
Treaty establishing the European Economic Community in 1957 by the Article
119 (now Article 157 of the Treaty on the Functioning of the European Union)
and later on it has been developed as a constitutional value
5
. One of the most
important developments in this direction can be considered the Charter Of
Fundamental Rights Of The European Union, published on Official Journal of
the European Community in December the 18
th
, 2000. In this Chart it has been
clearly stated that “Any discrimination based on any ground such as sex, race,
color, ethnic or social origin, genetic features, language, religion or belief,
political or any other opinion, membership of a national minority, property, birth,
disability, age or sexual orientation shall be prohibited” and that “Equality
between men and women must be ensured in all areas, including employment,
work and pay”
6
. The Council Directive 2004/113/EC is another step that went
further on, taking into consideration the principle of equal treatment between
men and women for the access to and supply of goods and financial services
(insurance policies included). In this Directive the Article 5.1, says “Member
States shall ensure that in all new contracts concluded after 21 December 2007
at the latest, the use of sex as a factor in the calculation of premiums and
benefits for the purposes of insurance and related financial services shall not
result in differences in individuals' premiums and benefits.” In addition the
Article 5.3 states that, “In any event, all member States must ensure that costs
related to pregnancy and maternity are attributed equally to men and women.”
Between these two Articles, the Article 5.2 introduces a derogation to the
general principle of the Directive, stating: “Notwithstanding Paragraph 1,
3
It is possible to recall among others, the “European Convention on Human Rights” (in particular Article 14) Council of
Europe, November the 4
th
1950, and the “International Covenant on Civil and Political Rights” United Nations General
Assembly, December the 16
th
1966
4
See for instance the ”Convention on the Elimination of All Forms of Discrimination Against Women”, dated December
the 18
th
1979
5
For further details on this topic see:
M. Bell, ”Equality and the European Union Constitution” Industrial Law Journal,
Volume 33, Issue 3, Year 2004, pages 242–260 and S. Fredman, “Equality: a new generation?”, Industrial Law Journal,
Volume 30, Issue 2, Year 2001, pages 145–168
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Charter Of Fundamental Rights Of The European Union” (2000/C 364/01), Official Journal of the European
Communities, December the 18
th
, 2000, Chapter III Equality, Article 21 and Article 23
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Member States may decide before 21 December 2007 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 Member States concerned shall inform the
Commission and ensure that accurate data relevant to the use of sex as a
determining actuarial factor are compiled, published and regularly updated.
These Member States shall review their decision five years after 21 December
2007, taking into account the Commission report referred to in Article 16, and
shall forward the results of this review to the Commission”. It means that with
this Article the EU Countries could decide to allow differences in individuals’
premiums and benefits before December the 21
st
2007, where the use of sex is
a determining factor in the assessment of risks and only if relevant and
accurate actuarial/statistical data were given. This opting - out was due to be
examined five years after the effective date of the Directive to ensure that the
reasons for the exemption were justified.
All EU Countries have used this derogation and eleven of them, including
Belgium, permitted this derogation only for particular classes of insurance
contracts, mostly in life insurance sector
7
. A dispute about the legitimacy of the
Belgian derogation was the starting point for the whole Test-Achats story. In fact
a Belgian consumer association, the “Association Belge des Consommateurs
Test – Achats” and two private individuals, Mr. Van Vugt and Mr. Basselier,
promoted a constitutional complaint against the Belgian Law transposing the
EU Directive
8
: the Belgian consumer association challenged the opting-out
obtained by Belgium, arguing that it was incompatible with the principle of equal
treatment in EU Law. The Constitutional Court of Belgium, considering the
complaint related to the use of a Derogation permitted by a National Directive,
decided to refer to the Court of Justice for deciding if the Community Directive
that allows the Derogation is compatible with EU Laws of a higher order or not.
In particular the question was if the Article 5.2 of Directive 2004/113 is
compatible with the Article 6 of the Treaty on European Union (mentioned at the
beginning in the same Directive). In that Article it is possible to read that “the
European Union is to respect fundamental rights as guaranteed by the
European Convention for the Protection of Human Rights and Fundamental
Freedoms” and “as they result from the constitutional traditions common to the
Member States, as general principles of Community Law”
9
. Those fundamental
rights were incorporated in the aforementioned Charter, which, with effect from
1 December 2009, has the same legal status as the Treaties. As already seen,
7
Other States were Netherlands, France, Ireland, Cyprus and the Baltic States. For further details see: European
Commission, DG Employment, Social Affairs and Equal Opportunities, “Study on the Use of Age, Sex, Religion or
Belief, Racial or ethnic and Sexual Orientation in Financial Services, in particular in the Insurance and Banking Sector –
Final Main Report”, CIVIC Consulting, 2010
8
In Italy there is an equivalent law, the D. Legis. 6.11.2007, n. 196, Implementation of Directive 2004 / 113/CE
implementing the principle of equal treatment between men and women as regards access to goods and services and
their provision
9
European Union, “Treaty On European Union”, February the 7th 1992, Title I Common Provisions, Article 6
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Article 21 and Article 23 of the Charter declare that any discrimination based on
sex is prohibited and that equality between men and women must be ensured
in all areas. But with the Article 5.2 of the Directive 2004/113, the EU Countries
could decide to allow differences in pricing and this opting - out was due to be
examined five years after the effective date of the Directive. So, given the fact
that the Directive does not say a word about the length of time during which
those differences may continue to be applied, all the EU Countries that have
used this option, could allow insurers to apply a hypothetical “unequal”
treatment without any temporal limitation. For the Court “Accordingly, there is a
risk that EU Law may permit the derogation from the equal treatment of men
and women, provided for in Article 5.2 of Directive 2004/113, to persist
indefinitely. Such a provision, which enables the Member States in question to
maintain without temporal limitation an exemption from the rule of unisex
premiums and benefits, works against the achievement of the objective of equal
treatment between men and women, which is the purpose of Directive
2004/113, and is incompatible with Articles 21 and 23 of the Charter. That
provision must therefore be considered to be invalid upon the expiry of an
appropriate transitional period”
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. The result is that the derogation can be used
only for a period of time, whose limit is December, the 21
st
2012.
So starting from December the 21
st
, 2012, insurance companies in the
whole EU will have to apply the principle of equal treatment for premiums and
benefits
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. Accordingly all the EU Countries has to adequate to this Legislation,
implementing the necessary measures (with the possibility, therefore, of the
emergence of additional features in terms of National Legislation). Anyway, in
case of inaction or absence of intervention by the National Legislatures, all
citizens can ask for the most favorable treatment acting against the
discrimination: in fact in the past, the Court of Justice ruled that, if National
Regulators do not intervene to adapt to the new legal situation, all citizens will
be able to ask to see their rights recognized
12
.
1.2 ANALYSIS OF THE EUROPEAN COURT OF JUSTICE VERDICT
The effect of the sentence is, in general terms, clear: unisex pricing for
insurance policies. But some questions can easily arise. For example: does it
10
European Court of Justice, “Judgment Of The Court (Grand Chamber) in Case C-236/09, Association belge des
Consommateurs Test-Achats ASBL, Yann van Vugt, Charles Basselier vs Conseil des ministres” March, the 1
st
2011
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We are still speaking now in general terms. We will see later, describing the Guidelines in Paragraph 1.3, which kind
of contracts are actually affected by the Directive and which not. Later on, in Chapter 2, we will focus exclusively on the
possible effects of the sentence for the Life sector, talking in particular about two products, term life insurance and
annuities. In Chapter 3, instead, there will be a practical example about how, in the light of the unisex gender ruling, one
of the most important Italian insurance company (Allianz Italia) has changed the offer of its annuities
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That is what happened in 1990 as a result of Case C-262/88 Barber / Royal Exchange Assurance on the prohibition
of discrimination between men and women's retirement age
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