New Equal Treatment Directive would cover insurance

Michael Rubenstein examines the European Commission's proposed new EU equal treatment Directive, covering access to and supply of goods and services.

The European Commission has proposed a new EU equal treatment Directive* that would cover access to and the supply of goods and services. The main point of interest from a UK perspective is that the Directive would regulate the use of sex as a factor in calculating premiums and benefits for the purpose of insurance and related financial services.

The proposed Directive would complement the revised Equal Treatment Directive in employment (see box). The legal base for regulating matters outside the employment field was provided by Article 13 of the Amsterdam Treaty and has already been used as the basis for parts of the EU Race Discrimination Directive . Most of the proposed new Directive parallels the parts of the Race Directive dealing with discrimination outside the employment field.

From a UK perspective, much of the content of the proposed Directive is already covered by the Sex Discrimination Act. However, there would still need to be a number of changes if the Directive were to be adopted in its current form.

Reasons for the proposed Directive

Introducing the proposed Directive, the European Commission acknowledges that there is little evidence of consistent discriminatory practice, as far as concerns access to or supply of goods and services; employers do not in general instruct their employees to treat men and women differently. "Discrimination is much more likely to occur in the context of spontaneous behaviour of individuals, either by withholding a good or a service, or providing it on less favourable terms and conditions to members of one sex than the other." Decisions on loans to small companies or individuals are given as an example.

However, Article 1(3) of the proposed Directive stipulates that: "This Directive would not preclude differences which are related to goods or services for which men and women are not in a comparable situation because the goods or services are intended exclusively or primarily for the members of one sex or to skills which are practiced differently for each sex." This is aimed at covering goods and services specifically designed for use by members of one sex, such as single-sex sessions in a swimming pool, or where the skills are not the same in practice. Perhaps different charges for men's and women's hairdressing might come into the latter category.

Insurance

Section 45 of the Sex Discrimination Act provides that nothing in the Act "shall render unlawful the treatment of a person in relation to an annuity, life assurance policy, accident insurance policy, or similar matter involving the assessment of risk, where the treatment - (a) was effected by reference to actuarial or other data from a source on which it was reasonable to rely, and (b) was reasonable having regard to the data and any other relevant factors." This section thus renders lawful sex discrimination based on actuarial factors, both for the purposes of employment-related benefits and as regards access to financial services.

The most controversial aspect of the suggested Directive is the proposal to preclude differences of treatment based on actuarial factors directly related to sex. Member states would be given an option to phase this in over an eight-year period, however, and the rule would only apply to new contracts entered into after the transposition date when the Directive comes into force (ie two years after it is adopted). The proposed Directive provides: "Member States shall ensure that the use of sex as a factor in the calculation of premiums and benefits for the purpose of insurance and related financial services is prohibited in all new contracts concluded after [the transposition date]".

The European Commission points out that it is common for insurance to be offered on different terms to women and to men. In the UK, this is said to be especially the case as regards critical illness insurance and car insurance. However, the Commission notes that: "Studies show that sex is not the main determining factor for life expectancy. Other factors have been shown to be more relevant, such as marital status, socio-economic factors, employment/unemployment, regional area, smoking and nutrition habits . . . Sex is at the very best a proxy for other indicators of life expectancy . . . The inference which can be drawn from such studies is that the practice of insurers to use sex as a determining factor in the evaluation of risk is based on ease of use rather than real value as a guide to life expectancy."

The Commission concludes with a powerful argument for abolishing differences in treatment based on actuarial factors: "Equal treatment for women and men is a fundamental right and the Commission believes that the freedom to set tariffs must be subject to that right. The separation of men and women into different pools leads to an unjustified difference of treatment and a resulting disadvantage for one sex or the other. The practice must be judged to be discriminatory and the legislator should therefore take action to prohibit it. An equivalent situation was at one time frequently found in the field of employment: in the past, it was not uncommon for employers to argue that they were reluctant to employ women of child-bearing age as there was a risk that they would be absent from work for periods of maternity leave, thus increasing their exposure to risks and resulting costs. While this is statistically true, it is clearly morally unacceptable as a reason for a difference of treatment of women and men in the labour market and the legislator has acted to prohibit such behaviour. The same argument holds true in the field of insurance."

It is proposed that member states should have an option to delay the application of the principle of equal treatment to the use of actuarial factors for a transitional period of six years beyond the general transposition period of two; insurance companies would have eight years to adapt their practices from the date of entry into force of the proposed Directive.

Harassment

The proposed Directive would also cover harassment based on sex and sexual harassment outside the workplace, in the context of providing goods and services. The definition of "harassment" and "sexual harassment" is the same as that relating to employment in the revised Equal Treatment Directive.

The Commission gives as an example of harassment based on sex that would be covered by the proposed Directive male employees "constantly making disparaging remarks about women customers". As for sexual harassment, examples given include "harassment by landlords of tenants; or by company buyers of salespeople, where, for example, sexual favours may be demanded in return for the award of contracts."

As noted, when the revised Equal Treatment Directive is implemented in the UK as regards employment, this will contain the same freestanding definition of harassment as is proposed in the new Directive. However, this would not extend to discrimination outside the employment context. Part IV of the Sex Discrimination Act - covering goods, facilities, services and premises - does not currently contain a provision parallel to that in the employment sections of Part II - allowing complaints of "detriment" on grounds of sex - that has formed the hook on which sexual harassment complaints have been hung. Under the Sex Discrimination Act as it now stands, therefore, a customer or a tenant subjected to sexual harassment would appear to have no remedy. Therefore, the proposed Directive would represent an important extension of rights in this area.

* Proposal for a Council Directive implementing the principle of equal treatment between women and men in the access to and supply of goods and services. See http://europa.eu.int/comm/employment_social/news/2003/nov/article13proposal­en.pdf


Revised Equal Treatment Directive to take effect in 2005

We reported quite extensively on the changes to the Equal Treatment Directive in EOR 92, when what is now Directive 2002/73/EC was in draft form. This Directive revises the famous Equal Treatment Directive 76/207 and, accordingly, will require amendments to be made to the employment and training provisions of the Sex Discrimination Act. The Directive must be implemented no later than October 2005. In the event, there were no changes of substance to the version of the Directive we reported on in EOR 92.

Not surprisingly, the amendments to the Sex Discrimination Act will be very similar to those made to the Race Relations Act as a result of the Race Discrimination Directive; they will closely resemble the new Regulations on religion or belief and sexual orientation (EOR 119) arising out of the Framework Employment Directive foreshadowed by the Government in its consultative document (EOR 101).

One of the changes required by the revised Directive has already been implemented: the provisions relating to post-employment discrimination. As we reported in EOR 121, the Sex Discrimination Act 1975 (Amendment) Regulations 2003 provide that it is unlawful for an employer to discriminate against a former employee by subjecting them to a detriment or to harassment where "the discrimination arises out of and is closely connected to a relationship between the complainant and the respondent which has come to an end". These Regulations took effect from 19 July 2003 and follow the decision of the House of Lords in Relaxion Group v Rhys-Harper that an employment tribunal has jurisdiction under the Sex Discrimination, Race Relations and Disability Discrimination Acts to consider a complaint of discrimination that relates only to acts alleged to have taken place after the end of the complainant's employment.