Handbook on International Insurance Law and Regulation - Essay Example

? CASE ANALYSIS By: Case Analysis This paper aims at analysing, critically, the European Court of Justice’s judgement in the Case “C-236/09 Association belge des Conssommateurs Test-Achats ASBL & Others v Conseil des ministres”. In this case, a Belgian consumer group; the Association belge des Consommateurs Test-Achats ASBL and two other individuals; Mr. Van Vugt and Mr Basselier, were challenging the opt-out contained in Article 5(2) in the Belgian law courts. Basically, the ECJ’s task here was to consider whether Article 5(2) on the Gender Directive was compatible with Article 6(2) of the Treaty with keen interest in the principle of equality and non-discrimination guaranteed by that provision. These proceedings were against the Conseil des ministres (Council of Ministers) for annulment of a section of the law (UK Pensions Update, 2011). According to InfoCuria (n.d), Article 6(2) of the Amsterdam treaty depicts that the Union shall respect all fundamental rights already guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms that were enacted on 4 November 1950 in Rome. Article 6 of the Treaty on European Union bears was founded on principles of democracy, liberty, respect for fundamental freedoms and human rights and the rule of law. These principles are common in the member states’ constitutions as general principles contained in community law. Article 5(2) expressly permits discrimination by reference to existing statistical data (Burling and Lazarus, 2011). Such were the grounds upon which the Belgian consumer group and the two citizens founded their case to find appropriate interpretation from the European Court of Justice. The European Court of Justice (ECJ) was deemed as the appropriate authority in this ruling. Based in Luxembourg, it is composed of 15 judges appointed by the agreement of the Member State governments. Each of the judges serves a six-year renewable term in office. According to Lloyd, Bajwa and Sukhwinder (1997), the court's procedures place greater emphasis on written submissions rather that oral argument. Following the hearing, the advocate-general delivers his or her well-reasoned opinion on the case. The opinion should be highly persuasive, but not binding on the court, which may differ from the advocate-general's propositions. The complainants presented the issue before the Belgian Constitutional Court in an effort to inspire the annulment of the Belgian law that transposed the directive. It if from this perspective that the Belgian Constitutional Court asked the Court of Justice for appropriate assessment on the validity of the derogation with respect to higher-ranking legal rules, and with reference to the principle of equality of genders enshrined in European Union law (Europe Log, 2011). The directive provided that Member States had the authority to permit exemptions from the rule of unisex premiums and benefits for as long as they could prove that underlying actuarial and statistical data were reliable, available to the public and regularly updated. Under Belgian insurance law, the insurance contract must have an element of uncertainty. An insurance contract under Article 1A of the Insurance Contract Law, 1992 states: A contract according to which, in return for the payment of a fixed or variable premium, a party, the insurer, commits itself towards another party, the policyholder, to provide the benefit stipulated in the contract in case an uncertain even emerges, that depending on the circumstances, either the insured or the beneficiary does not wish to emerge. (Keulers and Lydian, 2011 p. 2). In Belgium, there are no special courts for insurance disputes. Insurance disputes are brought before any court although the domicile of the policyholder has jurisdiction. Regulation of the Belgian insurance sector is also under Europe's highest court, the ECJ, which issues directives to member countries. Premiums are usually fixed or variable amounts, annual or any other date that agreed upon by both parties. Sometimes the premiums are altered to reflect such relevant changes as the event occurring from non-disclosure or misrepresentation of risk, or risk changes. A licence from the Belgian Banking, Finance and Insurance Commission (BFIC) is needed in order to operate in the Belgian insurance industry. The BFIC, in extreme instances, may oblige an increase in insurance premium if the original premium would threaten to result in a deficit for the insurance company. All insurance dealings are based on the principle of utmost good faith. The European Commission has formed rules that determine which member state's laws should govern insurance contracts. According to United States General Accounting (1993), the EC subjects insurance policies to the local laws of member states in which the respective policyholders reside. Theories of actuarial science have been used since the advent of modern day insurance. Actuarial science can provide general insight into risk management issues (Poitras, 2002). It examines situations where chance of loss or no loss is considered. The concept of insurance is hinged on the aspect of risk sharing (pooling of risks). Insurance often uses actuaries to perform risk assessment and determine the level of premiums that an individual need to pay according to risks that may occur. Different people from different occupations are predisposed to different risks. Therefore, insurance companies find it difficult to assign a uniform premium rate to clientele in the same pool since these clients suffer different levels of predisposition to the same risks. The ECJ made a final ruling that determined that the offering of different insurance premiums or other benefits based on gender are a violation of the fundamental right to equal treatment. Article 5(2) created discrimination on actuarial grounds. In this ruling, the ECJ; the highest European court, barred European insurance companies from pricing premiums differently based on the sex of prospective policyholders. Women tend to obtain cheaper premiums as they attributed to as a low risk group (PR web, 2011). The court termed this action as being against an EU directive that stated the union should always aim, in all its activities, to promote equality between men and women. The court ruled that the rules were not compatible with Article 6(2) of the Treaty. The decision by the ECJ on the insurance discrimination case was met by inflamed opinions concerning the authority of supranational European legal bodies (Lui, 2011). The case bases on Council Directive 2004/113 implementing the principle of equal treatment of both genders in the access to and supply of all goods and services. According to Wagner (2011), a directive, in European law, tells member states on what they ought to achieve but the details on how to go about the achievement are left to the member state to decide. All European member states are bound to comply with the directive because of the signing of the EU Treaty. This is subject to concerns, as some countries do not have the necessary mechanisms to come up with the implementation of certain directives. The issuance of blanket directives without minimal guidance from the ECJ can lead to confusion in some EU states. The ECJ has previously dealt with cases of discrimination. Most notably is the case of indirect discrimination. In one of its landmark cases; Bilka Kaufhaus v Weber von Hartz, the ECJ formulated the test it applies to indirect discrimination. The case dealt with exclusion of part-time workers from a large department store's pension scheme. The complainant, Mrs. Weber challenged this based on the right to equal pay citing EC law. This, she claims, adversely affected women since the majority of part time workers are women. The court ruled that the department infringed the right to equal pay when it excluded part-time employees from the pension scheme. It noted that the discrimination affected far more women than men. This was in favour of the complainant although the court suggested that the action ceased to be an infringement when the business proves that the ensuing exclusion was based on objectively justified factors that were unrelated to sexual discrimination (Loenen and Rodrigues, 1999, p 197). Decisions on discrimination by the ECJ effectively overrule decisions by local courts. A decision by the ECJ on sexual discrimination effectively overruled local UK financial limitations placed on sex discrimination awards (Slapper and Kelly, 2009). Therefore, the court had ample jurisdiction in determining that the local act violated sections of the European Union Treaty. Previous stands by the ECJ on sexual discrimination have not been met by unanimous approval. In Grant, the court showed decisively that the traditional mode of comparison between persons of the opposite sex was the suitable comparator to adopt. It was strongly criticised for this action (Micklitz, 2005). The question of the appropriate comparator of the two sexes is still under debate. With the court's ruling, the rule of unisex premiums will find application starting 21 December 2012. In the ruling, the idea of gender as a risk factor in insurance will constitute discrimination. This ruling is welcome as developing trends in the liberal world signify that individuals in both sexes sometimes equally expose themselves to risk. A point of disagreement would occur with significant statistical or actuarial data that would prove this notion to the contrary. Without such data, it would be, against the law, to charge different amounts of premium based only on gender. Tangible data has to be offered to substantiate such decisions in member states. Directive 2004/113/EC prohibits all discrimination based on sex in the access of goods and services. This is in relation to contracts entered into after 21 December 2007. The rule permits exemptions to it with the afore-mentioned conditions. Nevertheless, five years after transposition of the Directive into national law (21 December 2012), member states, are under the obligation, to re-examine justification for such exemptions, taking into account all recent actuarial and statistical data. Three years after transposition of the Directive, a report should be submitted to the commission. In this manner, the court sought to respect the jurisdiction of local courts and allowed them a hand in drafting legislation that would suit the local scene according to unique actuarial statistics occurring in the member state. According to Burling and Lazarus (2011), the derogation should effectively cease to have effect from 21 December 2012. It expires after the transitional period of five years. In the suite, the applicants in the main proceedings wanted an annulment of the Law of 21 December 2007 that transposed Directive 2004/113 into Belgian Law citing that it was against the principle of equality between men and women. In its very conclusion, the court ruled that Article 5(2) of Council Directive 2004/113/EC of December 2004 (that implemented the principle of equal treatment between men and women in accessing commodities) were invalid with effect from 21 December 2012. The decision to uphold the previously chosen date of 21 December 2012 as the due date for such actions is welcome as it shows consistency within the court. The conclusive outcome is that starting on this date (12 December 2012), exemptions for car insurance premiums were halted, and insurers will no longer consider gender in setting premium values. This takes away the right for insurers to calibrate premiums based on predisposition to risks, in as much as, it is apparently clear that women make safer drivers than men. Insurers will have to seek other modes of risk evaluation and depart from the traditional norm of assigning women low premium rates. A uniform mode of assessment will take care of risk factors. This does not take the role of actuarial data away. Actuarial data are vastly needed in the insurance sector. Sex is not the only factor that predisposes individuals to certain risks; other factors do come into play and actuaries serve the role of determining what these factors are. In conclusion, such ruling will surely lead to the review of certain rules in the pensions market, as well. According to Towers Watson (2011), the ruling does not force the UK to change the law, but might call for review in such law either through another ECJ ruling or because the government itself decides to do so. Some pension schemes use unisex actuarial factors for early or late retirements. In contrast, however, group life assurance premiums could continue to be priced on sex-based factors (Tower Watson, 2011). This is because of the fact that the benefit, and not the cost of the benefit that is subject to sex equalisation. Bibliography Burling, J. and Lazarus, K. 2011. Research Handbook on International Insurance Law and Regulation. Northampton: Edward Elgar Publishing, Inc. Europe Log. 2011. Judgement in Case C-236/09 Association belge des Conssommateurs Test-Achats ASBL & Others v Conseil des ministres. [0nline]. Available at: http://europeslog.weebly.com/6/post/2011/3/judgment-in-case-c-23609-association-belge-des-consommateurs-test-achats-asbl-and-others-v-conseil-des-ministres.html [accessed on 11 April 2012]. InfoCuria – Case-law of the Court of Justice. Opinion of Advocate General Kokott Delivered on 30 September 2010 (1). [Online], Available at: http://curia.europa.eu/juris/document/document.jsf?docid=82589&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&cid=351248 [Accessed on 11 April 2012]. Keulers, H. And Lydian, S. (2011). Insurance and Reinsurance 2011: Country Q&A, Belgium. New York: Practical Law Company Lloyd, J., Bajwa, L. and Sukhwinder (1997). Legal Framework of the European Union. London: Frank Cass Publishers Loenen, T. and Rodrigues R. (1999). Non-Discrimination Law: Comparative Perspectives. The Hague: Kluwer Law International Lui, E. (2011). Introducing a 'British Bill of Rights'. King's Student Law Review, 3(1), 2011 Milckitz, H. (2005). The Politics of Judicial Co-operation in the EU: Sunday Trading, Equal Treatment and Good Faith. Cambridge: Cambridge University Press Poitras, G. (2002). Risk Management, Speculation, and Derivative Securities. Waltham: Academic Press PR web (2011). EU Court Bans Sex-Based Auto Insurance Rating. [Online] Available at: April 2012 from http://www.prweb.com/releases/2011/3/prweb8173269.htm [Accessed on 11 April 2012]. Slapper, G. and Kelly, D. (2009). The English Legal System: 2009-2010. Albingdon: Routledge-Cavendish Towers Watson (2011). ECJ Sex Equalisation Ruling in Insurance Contracts. [Online], Available at http://www.towerswatson.com/united-kingdom/newsletters/pensions-digest/4083 [Accessed on11 April 2012]. UK Pensions Update (2011). ECJ Ruling on Gender Specific Insurance Premiums. London, Baker and Mackenzie. United States General Accounting Office (1993). Insurance Regulation in the European Community: Regulatory Issues in Creating a Single Insurance Market. Washington: DIANE Publishing Wagner, A. (2011). Association belge des Conssommateurs Test-Achats ASBL & Others v Conseil des ministres, Case C-236/09. [Online]. Available at: http://www.1cor.com/1315/?form_1155.replyids=1351 [Accessed on 11 April 2012]. Read More