EU ruling on sex equality: price differentiation, price discrimination or an Unintended Consequence?

If it can be statistically proved that women have fewer car accidents than men, is it fair that they should pay the same for their vehicle insurance? And if a man and a woman have paid the same contributions to a private pension scheme during their working lives, but after they both retire at 65 the man is statistically likely to live for a shorter time that the woman, is it reasonable that the man receives the same monthly pension payment as the woman for the rest of his life?

Until now, the female motorist will have paid a lower insurance premium for her car, to recognise the lower likelihood of making a claim which will cost the insurer money. However the male pensioner has received a higher monthly pension payment, to reflect the fact that he should receive as much benefit from his pension before his likely date of death, as the female pensioner before her, later, likely date of death. From today, these charges and payments must be made equal, thanks to a ruling in the European Court of Justice ruling that gender equality must be used in insurance pricing and pension payments. The court statement says that “Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination.”

How does this measure up against the idea of vertical equity, which allows for the ‘unequal treatment of unequals’? In order to achieve vertical equity in taxation, taxpayers with different resources must be treated differently, for example, by having a progressive tax system. The insurance industry says that their actuarial statistics show that, in car accidents and life expectancy, men and women are not equals and that it is not fair to treat them as if they were. However, if we subscribe to the principle of gender equality, then should horizontal equity, which requires ‘equal treatment of equals’, be the overriding principle which says that men and women must be treated equally in this case, just as they must be in applying for a job?

There does seem to be an example of price discrimination here, and the different gender groups are easy for the insurer to separate without a risk of market seepage. But is that necessarily a problem? In the FT, the Daily Telegraph and on the BBC there are plenty of commentators and insurance company spokesmen - sorry, spokespersons - suggesting that it is reasonable for insurers to use gender to calculate risk based on solid actuarial evidence and statistics, and that the pricing decision is therefore based on logic. They also suggest that the consumer will now suffer as prices will go up across the board as insurance companies try to build in the new risk. Surely, that cannot be the intended consequence of legislation designed to bring about gender equality.

Can we expect this to be extended to other areas of price discrimination? Students and OAPs expect to pay a lower price for many services from bus travel to theatre tickets. Is that fair, or should those of us between the ages of 25 and 65 claim that this is a breach of age discrimination legislation? And if we did, what are the chances that we would be charged the lower price, rather than students and OAPs being expected to pay more?