1. Summary of Regulatory Impact Analysis (RIA)

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1 1. Summary of Regulatory Impact Analysis (RIA) Department/Office: Title of Legislation: Justice & Equality Amendment of Equal Status Act 2000 to prohibit gender differentiation in insurance with effect from 21/12/2012. Stage: General Scheme of Bill Date: 10/05/2012 Related Publications: Decision of the ECJ in case C-236/09 Test-Achats (available at European Commission communication, Guidelines on the application of Council Directive 2004/113/EC to insurance, in light of the judgment of the Court of Justice of the European Union in Case C-236/09 (Test-Achats) (available at Report of the Working Group on Insurance-related Issues in the Gender Non-Employment Directive (2007) (available at Available to view or download at: Contact for inquiries: Deaglán Ó Briain, PO Telephone: What are the policy objectives being pursued? To implement the decision of the European Court of Justice in the Test Achats case, which prohibits gender differentiation in insurance products. What policy options have been considered? The matter relates to the practice of risk-based gender differentiation in insurance and financial services sold in Ireland, the EU and in 3 rd countries. 1. Do nothing. 2. Comply with the ECJ judgment by prohibiting gender differentiation in insurance premiums and benefits, in all new contracts concluded on or after 21/12/2012, and existing contracts extended after that date which would otherwise have expired Preferred Option: The Do Nothing option is not acceptable as it entails exposure to infringement proceedings and potential penalties for not complying with EU equality law. The preferred option therefore is to amend our domestic legislation (the Equal Status Act 2000 to comply with the ECJ judgment. Note: this will not affect the existing permissibility to market differentiated products for health insurance sold abroad, in jurisdictions which permit gender differentiation

2 OPTIONS COSTS BENEFITS IMPACTS 1 Cost for Exchequer: financial risk arising from litigation for noncompliance with EU law & compensation claims from consumers. Impact on consumers: if the State does not apply gender equality rights under EU law. 2 Cost for Exchequer: negligible. Cost for industry: cost of reviewing and amending risk classification, underwriting, pricing of products and application procedures for new contracts. Cost for consumers: none directly. Benefits to consumers: enforces gender equality rights under EU law. Benefits to industry: competiveness of Irish-based health insurers selling outside EU will not be impacted. Impact on industry: effort of introducing unisex products. Impact on consumers: For new contracts only, women may pay more for insurance based on mortality risk (life assurance) and risk of motor accident, but less for products based on morbidity risk (critical illness cover), while men may pay more for annuities, but less for critical illness cover and motor insurance. 2: Description of Policy Context and Objectives The EU Gender Goods and Services Directive (2004/113/EC) was adopted in 2004 and prohibits discrimination on the grounds of gender in the supply of and access to goods and services. It did, however, allow Member States to continue to permit gender-sensitive pricing and benefits in insurance and related financial services, where evidence demonstrated that risks differed based on gender. Member States were required to ensure statistical or other data in support of such differentiation was published and to review their decisions to avail of the derogation within 5 years of the Directive coming into force, i.e. by 21 December All EU Member States availed of this derogation. However, in a judgment given on 1 March 2011, the European Court of Justice has ruled that the derogation in Directive 2004/113/EC from the general rule of unisex premiums and benefits in insurance and related financial products is invalid with effect from 21 December The EU Commission has announced its intention, post-december 2012, to ensure national legislation is in full compliance with the ruling, and to monitor the evolution of the insurance market and of overall price levels, taking appropriate action (including under competition law) in the event of anti-competitive conduct by insurance providers. Ireland made use of the derogation in question to continue to permit gender-sensitive calculation of premiums and benefits in life assurance (both life cover and mortgage protection), critical illness cover, income protection cover, annuities, pensions and motor - 2 -

3 insurance. Irish law also permits gender differentiation in respect of health insurance traded internationally, where gender differentiation is allowed under the law of the country in which the product is to be sold. The immediate objective is to amend national anti-discrimination law and practices in the insurance industry to comply with the judgment of the European Court of Justice, no later than 21 December : Identification and Description of Options Option 1: Do nothing. The do nothing option is included solely for benchmarking purposes. Option 2: Comply with the ECJ judgment, by amending our domestic legislation prior to the deadline set by the Court. This requires us to prohibit gender differentiation in insurance premiums and benefits, in all new contracts concluded on or after 21/12/2012, and existing contracts extended after that date which would otherwise have expired. The court judgment does not affect health insurance products sold abroad, in jurisdictions which permit gender differentiation. The use of gender in insurance is regulated under primary legislation by the Equal Status Acts It is proposed to continue to permit collection, storage and use of gender and genderrelated information by the industry. This remains permissible under the judgment and the Commission s guidance in relation to implementation of the judgment, provided it does not lead to gender differentiation at an individual level in insurance premiums and benefits, for the purposes of reserving and internal pricing, reinsurance pricing, marketing and advertising, health and life underwriting. The obligation on the Central Bank to publish risk data relevant to gender differentiation in insurance will cease with effect from the year Historical risk data relevant to the period will continue to be available, thus satisfying the publication requirement in respect of the period during which the derogation in Article 5(2) was effective. 4: Analysis of Costs, Benefits and Impacts for ALL Options Option 1: Do nothing. Costs/Risks: This option presents a significant financial risk to the State. To take no action would mean a failure to comply with our EU obligations and could result in infringement proceedings by the European Commission, while also leaving the - 3 -

4 State open to Francovich-type actions for compensation taken by consumers who believe their rights to equal treatment to be infringed by non-action by the State. This option does not meet the objective and is not recommended. Option 2: Comply with the ECJ judgment, by amending our domestic legislation prior to the deadline set by the Court. Costs/Risks: Initial costs: negligible. Benefits: Complies with EU obligations under Test-Achats case, reducing the risk of litigation. Provides clarity and certainty to consumers holding existing gender-differentiated insurance contracts and to insurance providers, that these contracts will be unaffected by the change. The competitiveness of Irish-based insurance providers supplying health insurance sold abroad in jurisdictions which still permit gender differentiation from the requirement for unisex premiums and benefits is not affected. Impacts: National competitiveness: No significant impact identified. The socially excluded and vulnerable groups: No significant impact identified. The environment: No impact. Whether there is a significant policy change in an economic market, including consumer and competition impacts: This option represents a policy change in respect to the insurance market, which to date has been permitted proportionate differentiation in products and pricing on the basis of gender. The industry has been consulted and is aware of the steps required to implement the judgment; these are manageable. The rights of citizens: This option enforces the right to gender equality within the scope of EU law, as interpreted by the ECJ. Compliance Burdens: No significant impact identified to the State, other than communication of the amending legislation to the EU Commission. The existing individual complaints mechanism under the Equal Status Acts will continue to apply, as will the investigative and advisory powers of the Equality Authority, while information material supplied by both bodies and by third parties, such as the Citizens Information Board, will need to be updated. The insurance and actuarial sector will be obliged to review, and amend if necessary, their practices in order to offer unisex premiums and benefits from 21/12/2012 in the product areas in which gender differentiation is currently permitted (i.e. in motor insurance and life assurance). The forthcoming change to unisex premiums and benefits will have to be communicated clearly to consumers in advance of December 2012, by the industry and by State bodies such as the Central Bank, the National Consumer Agency and the Equality Authority

5 North-South and East-West Relations: No impact, as the UK, including NI, is also obliged as an EU Member State to implement the Test-Achats judgment. 5: Consultation The draft legislation has been prepared following consultation with the Office of the Attorney General and the Departments of Foreign Affairs & Trade, Finance, Public Expenditure & Reform, Health, Social Protection, Transport, Tourism & Sport, Jobs, Enterprise & Innovation, the National Consumer Agency, the Central Bank and the Irish Insurance Federation. Views expressed through this consultation have been addressed in the proposal. 6: Enforcement, Compliance and Review No additional enforcement, compliance or review mechanisms are required, as the objective will be achieved on enactment. The EU Commission has announced its intention, post-december 2012, to ensure national legislation is in full compliance with the ruling, and to monitor the evolution of the insurance market and of overall price levels, taking appropriate action (including under competition law) in the event of anti-competitive conduct by insurance providers. The State is obliged, under the provisions of article 17 of Directive 2004/113, to communicate all transposing measures (including subsequent amending regulations) to the EU Commission, as soon as practicable after its enactment. The State is also obliged to communicate all available information concerning the application of this Directive to the Commission every five years with effect from The current proposal does not present any change to these obligations. 7: Publication It is intended that this RIA will be published on the website of the Department of Justice & Equality, on publication of the draft legislation