Extensive analysis

Bulgarian Science Center

INTERNATIONAL EURASIAN ACADEMY OF SCIENCES

Directive 2004/113/EC

Recital (19) Certain categories of risks may vary between the sexes. In some cases, sex is one but not necessarily the only determining factor in the assessment of risks insured. For contracts insuring those types of risks, Member States may decide to permit exemptions from the rule of unisex premiums and benefits, as long as they can ensure that underlying actuarial and statistical data on which the calculations are based, are reliable, regularly up-dated and available to the public.

Article 5 (2) Notwithstanding paragraph 1, 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.

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ECJ Decision of 1 March 2011

• Article 5(2) of Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services is invalid with effect from 21 December 2012.

• This means that the general insurance, life insurance, health insurance and pension insurance undertakings cannot charge different premiums and benefits to men and women because of their gender.

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Reactions: Press and Experts

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• Insurers angry at ECJ gender ruling (leading UK tabloid’s headline).• The CEA, Europe's insurance and reinsurance federation, announced

it was "deeply disappointed" by the ECJ's verdict.• "Europe-wide the effect on the price and benefits and on the choice

of insurance products for consumers could be significant," said Michaela Koller, director general of the CEA. "The decision of the judges not to recognise that gender is a legitimate factor in insurance pricing and that insurance pricing is based on a fair risk assessment process could be bad news for insurance customers."

• ECJ gender ruling 'could throw insurance into turmoil' (UK press).• ECJ ruling a "seismic event" which will reshape retirement (UK

specialist financial publication).

Questions to the EC

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• Is the Commission aware of the considerable evidence concerning the role of gender as a determining risk factor, for example in incidents of dangerous driving leading to fatalities?• What analysis has the Commission done concerning the potential social and economic impact of the abolition of this derogation?• Is the Commission aware that car insurance costs are based on actuarial calculation and that, as accident and claims rates are higher particularly for younger men, lower vehicle insurance rates for women are not an indication of gender discrimination but the result of precise gender-neutral calculation?• What concrete steps will the Commission take to address this issue, which will penalise consumers — both male and female —and harm the European insurance and pensions industry?

Personal opinions

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• MEP reaction was swift, with UK Conservative deputies branding the ruling as “This ruling is utter madness. It is a setback for common sense”.• Martin Callanan, leader of the UK Conservative MEPs described the ruling as "nonsense".• Bright Grey and Scottish Provident want 'no stone left unturned' to overturn ECJ rule.• Philip Jarvis of the law firm Allen & Overy in London says: “insurers may have to collect more individual data on policy holders to compensate for the loss of sex as a quick dividing line. The insurance industry is warning that this will have wide ranging ramifications to the provision of insurance products, most obviously an increase in their costs to determine the socio-economic factors to be verified instead of gender. The cost of which is likely to be passed on to the consumer”.

Opinions of Customers

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• The advocate general, Juliane Kokott, argued that there was "no compelling evidence that women live longer or drive more safely because they are biologically women”.• This Opinion is simply wrong. It's so obviously wrong it's hard to know what else to say. A single Advocate General has decided that she knows better than the entire insurance industry how to price risk. It's completely bonkers.• This is a ridiculous ruling and one which will cost everyone in the Country a fortune. Woman will get more expensive car insurance and men won't get the right return on annuities. And if your pension no longer gives good value (based on your life expectancy) who in their right mind will buy one ?• This is the first time the European court has legislated against the facts of human biology. It surely can't be long before they legislate against the laws of physics.• The European Commission should take steps for impeachment of the advocate general Juliane Kokott.• Unelected judges have overruled the will of democratically elected MEPs and governments; is it any wonder people are do disenchanted with the EU ?• This is just more EU red tape that is going to cost us money and provide no real benefit, time to get out of this union whilst we still have an economy left.

Consequences for the Customers

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• During the transitional period the market is likely to be uncertain and unstable:

- Sharp price changes before and after 21/12/2012.

• In the short term men and women will equal pay. • In the long term potential risk of higher social costs caused by:

- Reduce the choice of coverage and products offered; - Unaffordable for some classes of customers; - Shrinking market and increasing the number of uninsured; - Increase the number of road accidents involving more young drivers with powerful cars; - Blow to future retirees in addition to the pension reforms undertaken in many EU countries.

Consequences for the Customers

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Examples for a new Discrimination:

• Auto Insurance - Prices for WOMEN drivers under age of 26 years probably rose to 25% - ... And those of MEN under 26 years may be cheaper by 10%

• Life Insurance - average women live longer, allowing for lower premiums, ceteris paribus

- WOMEN premiums can go up to 20% - Those of MEN may not be cheaper

• Pension Insurance - average men live less, giving them higher pensions than women ceteris paribus

- MEN pensions can be reduced by up to 8% - ... While these for women to increase by 6%

• Changes are possible in other classes

Court contradicts itself !

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IEASECJ Consideration: “28 The Court has consistently held that the principle of equal treatment requires that comparable situations must not be treated differently, and different situations must not be treated in the same way, unless such treatment is objectively justified”.

• The situation is not comparable and is quite different !

• This contradicts also to the following Scientific Consideration: “Treatment of the situations concerning General & Life insurance, Pensions and Health insurance for Critical illnesses is precisely objectively justified on the basis of biological differences between the sexes, which can not be ignored by the Court”.

Many scientific facts and multi-annual actuarial and statistical data on mortality, life expectancy and morbidity objectively justify the use of sex as a determining factor in the risk assessment. Here we produce as evidences multiple objective data.

Biological facts

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• Females have two X chromosomes, while males have one X and one Y chromosome. Genetically determined syndromes and other hereditary diseases are different for both sexes. Objective fact is that in all countries of Europe and other continents the life expectancy for men is significantly shorter than that of women:

• >> The main biological causes of death are gender-specific - prostate and breast cancers being the main examples for males and females respectively;

• >> Men have a greater propensity to develop heart disease in early life;• >> The female hormones estrogen and progesterone are thought to have

positive health benefits whereas testosterone is thought to be detrimental to health;

• >> Having two X chromosomes may provide some level of ‘redundancy' to females and, in particular, substantially reduce the risk of females developing recessive inherited diseases.

• The gender is recognized as a socially acceptable and valuable factor necessary for properly managing insurance risk.

Biological facts

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Source of Data: World Development Report 2012

Life expectancy at birth (years)

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Males Females

geo\time 2006 2007 2008 2006 2007 2008

European Union (27 countries) 75,8 76,1 76,4 82,0 82,2 82,4

Euro area (17 countries) 77,3 77,5 77,8 83,3 83,4 83,5

Lithuania 65,3 64,8 66,3 77,0 77,2 77,6

Switzerland 79,2 79,5 79,8 84,2 84,4 84,6

Source of Data: Eurostat

Life expectancy at 60 (years)

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Males Females

geo\time 2006 2007 2008 2006 2007 2008

European Union (27 countries) 20,5 20,7 20,9 24,7 24,8 24,9

Euro area (17 countries) 21,3 21,5 21,7 25,6 25,7 25,8

Lithuania 15,5 15,4 16 21,5 21,8 22

Switzerland 22,5 22,6 22,9 26,5 26,5 26,6

Source of Data: Eurostat

Stroke and Cancer statistics

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Number of deaths Stroke Stomach Lung Breast Injuries and

per 1000 causes cancer cancer cancer poisoning

MEN

Total EU 89,7 18,3 76,3 0,0 64,9

Total Europe 109,9 20,5 60,3 0,0 122,4

Lithuania (96) 82,6 23,9 55,1 0,0 197,2

Switzerland (94) 69,1 14,9 68,1 0,3 95,3

WOMEN

Total EU 135,4 13,5 21,5 40,5 35,9

Total Europe 177,4 15,1 15,4 29,7 46,0

Lithuania (96) 155,6 18,3 9,4 28,5 66,9

Switzerland (94) 108,0 10,6 20,1 51,9 60,8

Source of Data: World Health Organization

Sex differences in driving and insurance risk

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IEAS• Differences between male and female drivers in terms of crash

rates are evident in a wide range of countries, including the United States, Europe, Asia and Africa, with males being significantly more at risk than females.

• Similar differences are evident regarding male and female pedestrians and accidents in the home and workplace. They derive from more fundamental differences in specific areas of behavior and psychological functioning.

• There is extensive evidence to show that men, and young men in particular, tend to be more aggressive than women (in all known cultures) and they express aggression in a direct, rather than indirect, manner. This has a very significant impact on driving –encouraging more competitive and hostile behavior with consequent higher probabilities of crashing.

• A report published by the Department of Gender and Women's Health at the World Health Organization has called for recognition of these fundamental differences between men and women drivers and the development of gender-differentiated policies in relevant areas.

Other less apparent differences

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• The difference between a man and a woman is first manifested by the absence or presence of the Y-chromosome during conception and becomes more evident as they grow and develop.

• Physically, a man and a woman are very distinctly different. There are other less apparent differences.

• Women are good at multitasking and in creating solutions that really work since they have access to both sides of their brains and utilize even non-verbal cues to solve problems. Men, on the other hand, use the left side and take on tasks and problems one at a time.

• This difference in the brain is also the reason why men have better mathematical abilities due to their larger inferior parietal lobule than women while women are more proficient in language than men because they have a larger Broca’s area and Wernicke’s area than men.

• Men and women are also susceptible to different disorders because they use different sides of their brains. Men tend to have language problems and are susceptible to autism, ADHD, and Tourette’s syndrome while women are more susceptible to depression and anxiety.

Why the Decision must be annulled?

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IEAS• It contradicts to Article 153(2) TFEU, which establishes the principle of

consumer protection:“2. Consumer protection requirements shall be taken into account in defining and implementing other Community policies and activities.”

• and Article 95(3) writes:“3. The Commission, in its proposals envisaged in paragraph 1 concerninghealth, safety, environmental protection and consumer protection, will take as a base a high level of protection, taking account in particular of any new development based on scientific facts.”

• The decision contradicts to Article 2 of the International Covenant on Economic, Social and Cultural Rights, adopted by the UN General Assembly.

• We believe these arguments need to be made to ensure that gender is recognized as a socially acceptable and valuable factor necessary for properly managing insurance risk. In its ruling, the ECJ deemed Recital 18 of the Directive to reflect an objective justification for the comparable treatment of incomparable perils.

• ECJ exceeded its authority on a matter which falls within the competence of the European Court of Human Rights.

Why the Decision must be annulled?

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• The judgment passes no comment on whether males and females are indeed comparable in terms of insurance risk and hence whether identical treatment is justified under the ECJ's own principles of equal treatment.• This will result in a chaotic period as some providers removed products to update underwriting systems while a mass re-pricing took place as the market sought to find the correct level for risk pricing.• The specific long-term effects of the judgment still need to be analyzed.• Actuaries and Insurance undertakings are concerned that the decision may be extended and other vital underwriting factors such as age, health status, disability, smoking habits and others may be challenged.• Members of the IAA Health Section expressed serious concern that this decision will have serious implications not only in EU but also worldwide.•This decision of the ECJ is not binding for third countries from Europe and other continents. It will prevent the equalization process of supervisory regime of third countries to the requirements of the EU.• The decisions of any human court, which contradicts to the laws of Nature are illegal and invalid.

Solution of the problem

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• The decision of the Court will force insurers to search for other socio-economic factors to be verified instead of gender or will require DNA analysis as a factor for risk assessment.

• I appeal to the higher responsible authorities of the European Union - European Commission, European Parliament, European Council and Governments of member states about the necessity to annul the decision of the Court.

• The avoidance of the ECJ decision may be based on the EU Treaty or by passing a new Law by the European Parliament providing option to annul such decisions of the ECJ.

Red Alert

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This illogical and wrong decision of the ECJ will have unforeseen and fatal consequences:

• There is a serious risk of the unity or consistency of Community law being affected.

• This decision will lead to significant adverse social consequences encouraging anti-European sentiment and nationalist movements, and will threaten the stability of the European Union.

• It is a serious threat to the financial stability of the European general and life insurance, health insurance and pension internal market, and will deepen the current acute financial and economic crisis.

• It is a factor assisting the processes, leading to a recession in the European Union.

Prof. Alexander Sadovski, MS, Ph.D., D.Sc.

Bulgarian Science Center

INTERNATIONAL EURASIAN ACADEMY OF SCIENCES