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Lord Williamson of Horton rose to move, That this House takes note of the report of the European Union Committee, Sexual Equality in Access to Goods and Services (27th Report, Session 200304, HL Paper 165).
The noble Lord said: My Lords, the report concerns an important proposal from the European Commission to extend European Union gender discrimination legislation with regard to the supply of and access to goods and services. It is a broad objective that we share in principle and in the interests of British citizens, notably when they are in other member states. It relates essentially to commercial transactions for remuneration.
United Kingdom sex discrimination legislation, notably the Sex Discrimination Act 1975, already largely covers the ground. In important respects, it is more comprehensive in its scope and in its reference to goods, facilities and services. The original Commission proposal of November 2003, however, which was the subject of the Select Committee's examination and report, had one important difference from the United Kingdom's sex discrimination legislation. It concerns the criterion for premiums and benefits for some insurance and related financial services. Any differentiation by gender would have been prohibited by article 4 of the Commission's proposal of November 2003, but it is specifically permitted by the United Kingdom's Sex Discrimination Act, if it can be justified as reasonable. That difference, which is of some commercial importance, gave rise to a large volume of submissions and evidence to our sub-committee.
I shall deal with the main questions that arise on the Commission's proposal of November 2003, notably its scope and exclusions; the question of article 4 and the specific issues of motor insurance and annuities; the monitoring of any exceptions to the principle of equal access and the value of continued research; and the commercial opportunities for British insurers arising from a deepening of the single European market in insurance and related financial services.
First, it is essential that I bring the House up to date on the positive developments that have taken place. There has been a large measure of agreement between the recommendations made by the Select Committee and the negotiating position taken by the United Kingdom Government, with considerable success, in Brussels. That can be seen in the Government's response to our report, which we welcome.
As a result of the position taken by the Select Committee, by the United Kingdom Government and other governments and by the financial services
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industry, the Commission has revised its proposal. The prospects of an agreement at European Union level that would take account of the practical problems that arose from the original article 4 but would preserve the other advantages of the proposal seem to be good. In so far as the Select Committee contributed to that result, it is to be welcomed. If it were not in bad taste and at a bad time to say it, one might say that the Commission and the Government had shot our fox.
There are some issues that none the less arise from the Commission's proposal and, to some degree, the revised proposal. The Commission's proposal is a draft directive that requires consultation with the European Parliament and a unanimous decision by the Council of Ministers. I make the point because I was struck by the fact that, although there are in the UK many strong views about unanimity and qualified majority voting, in cases where unanimity applies and is important, there are sometimes few references to it.
The sub-committee examined the need for and the scope of the Commission proposal. We believe that the proposal will have a limited impact in the United Kingdom, in the light of our existing legislation and the revision of article 4 of the proposal. It could be of greater value in some other member states, including the new member states, although the Commission's evidence was mainly anecdotal.
There are some significant exclusions from the proposal, notably education, media and advertising and, indirectly, single-sex sporting activities, single-sex voluntary activities and private clubs and religious organisations. We agreed with the Government that the exclusion of education avoids a potential and undesirable distinction between private and public sector education. We also accepted that there could be difficulties in drafting legislation relating to the sexes in media and advertising, in particular because of the difficulty of any draft which might infringe the freedom of the media under the European Convention on Human Rights.
It should, however, be stressed that the Commission indicated that it has decided to adopt a step-by-step approach so that some of those issues may come back again later. But, overall, we have accepted the exclusions. In relation to health, which is not excluded, we recognise that, in due course, the question of whether for this purpose the National Health Service should be considered a service for remuneration may ultimately be decided by the Court.
I come now to the question of differentiation by gender in setting some insurance premiums, particularly motor insurance for newly qualified drivers, and in annuities. The approach of the Select Committee stems from the need to reconcile the commitment to extending the principles of equality, which we endorse, with the practicalities of application in a fair and reasonable manner.
It will be clear from our report that where we have accepted for objective reasons some differentiation by gender, we have done so in a restrictive manner and subject to external monitoring to ensure that the factual
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basis continues to be correct and justified. Contrary to the impression that may have been given in some comments, our report is not just a carte blanche for gender differentiation in insurance and annuities. It is limited, subject to the continuation of objective differences and, in our recommendation, subject to monitoring.
When I commented at the time of the issue of the report, I said that in time gender can and should be taken out of most calculations for car insurance premiums. But when companies set premiums for newly qualified drivers, gender matters. These and younger drivers have not had time to build up a record of claims, accidents and driving performance. The evidence that we received showed that the average claims cost of males between 17 and 19 years old was about 60 per cent higher than that of corresponding females, although the difference, of course, decreases steadily over a lifetime of driving.
Over a recent five-year period, males committed more than 85 per cent of serious driving offences. That is why, in the UK, motor insurance premiums for young women are justifiably lower. If we were not to take account of gender, younger women would have to pay perhaps 10 to 30 per cent more for their motor insurance, which would be a harsh penalty to impose on women. It is worth noting that most car drivers in the European Union pay premiums that take some account of genderin France, Germany, Italy, Spain, Belgium, Austria and Ireland.
The Government have negotiated the continuation of some justified differentiation by gender. In their reply to the report, they stress that for insurance pricing to be fair to consumers, relevant risk factors must be taken into account, including age and gender when appropriate. The evidence given by the Equal Opportunities Commission was also important. The committee agreed with its broad guiding principle, which is reflected in our recommendations.
I turn now to annuities, for which the UK market is the biggest in Europe. The substantive issue is the difference in the longevity of men and women. Because women in general live longer than men, premiums for term life assurance are lower for women. But when an annuity converts a lump sum into regular payments from a given age over the remaining life of the policy holder, a female annuity holder will typically receive less than a male because the assumption is that she will receive the sum for longer.
At birth, a female's life expectancy is just over four years more than that of a man. At age 50, it was about 3.6 years more in 2002. Surprisingly, the figures going back over a century show that the difference in life expectancyfor example, at age 45, in favour of a femaleis greater now than it was in 1901.
We examined a great deal of evidence on that matter and were satisfied that gender should be allowedI quote from the report"for the time being" as a relevant factor in calculating premiums and benefits for life assurance and annuities. However, we recommended more research on the relevance of gender and we made
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quite clear that if the gap between male and female longevity were to disappear, insurance premiums and benefits should be rapidly adjusted.
I know that some Members of your Lordships' House may not agree with the report. But in view of the limits that we put on our recommendations, that difference may not be quite as substantial as it may at first appear.
To that extent, our recommendations, the Government's position and the revised Commission proposals run quite closely in line. I should add that we wished to see more formal monitoring, which is our recommendation at paragraph 10.19, but that is something that the Government have not accepted. They consider that the cost of such monitoring would not justify the benefit. Instead, the Government seek to rely on the work of a working group, covering government representatives and other interests, which is the subject of a Commission declaration in the Council minutes.
It is unlikely that the directive will be formally adopted before 2005, but the long time and the substantial volume of work devoted to the Commission's first proposal has been very worth while. We shall now have a result that is acceptable to the Government and broadly reflects the approach of our own Sex Discrimination Act 1975. I commend the report to the House.
Moved, That this House takes note of the report of the European Union Committee, Sexual Equality in Access to Goods and Services (27th Report, Session 200304, HL Paper 165).(Lord Williamson of Horton.)
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