The European Convention and the South African Constitution differ in an important respect. The charter of fundamental rights in Europe prohibits any discrimination on grounds of sex and requires states to ensure equality between men and women in all areas. In South Africa, fair discrimination is permitted, but the lines will not be starkly drawn and the onus will be on the insurer to show that the basis for determining premiums is justifiable.
Section 9 of the South African Constitution makes everyone equal before the law with the right to equal protection and benefit of the law and goes on to say that “no person may unfairly discriminate directly or indirectly against anyone on one or more grounds including race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief culture, language and birth.” Discrimination is unfair unless it is established that the discrimination is fair. The Promotion of Equality and Prevention of Unfair Discrimination Act, 2000 extends the equality grounds to other general grounds causing or perpetuating systemic disadvantage, undermining human dignity or adversely affecting equal enjoyment of rights and freedoms. In determining whether discrimination is fair, account may be taken of whether the discrimination “reasonably and justifiably differentiates between persons according to objectively determinable criteria (for example, actuarial evidence), intrinsic to the activity concerned (for example, insurance business).”
Examples in motor insurance
I will use motor insurance to illustrate the point, but the principles apply to all classes of insurance, long-term and short-term. Life cover, annuities, health cover and many others are priced on a gender basis. Reasoning goes astray if you think about the issue in relation to men versus women. It is true that on raw statistics women drivers have fewer accidents and lower claims than men drivers on average. The problem may be the type of male driver who was the complainant in the USA case, Hartford Accident and Indemnity Company v Insurance Commissioner of the Commonwealth of Pennsylvania (1984).This insured driver was a 26-year-old unmarried male with an unblemished driving record. He successfully complained that he was discriminated against unfairly because gender-based rates resulted in him paying higher premiums than would a similarly situated female for identical cover. The court could find no casual connection between the solely gender-based classification relied on by the insurers and the risk; and held that the gender-based rates were unfairly discriminatory and invalid.
In the Canadian case, Zurich Insurance Company v Ontario Human Rights Commission (1992), a single, 20-year-old male complained that young single male drivers were discriminated against by having to pay higher premiums irrespective of their driving ability and record. You have to remember that differentiation based only on gender means that a young woman who is a speed-freak gains and the ultra-careful young male driver is disadvantaged. Under Ontario law, a distinction in premiums can be made on “reasonable and bona fide grounds” (compare this with the Equality Act's requirement for reasonable and justifiable differentiation). The court did not accept that statistical evidence alone satisfies the reasonableness test. The quotation I want to refer you again to is: “Human rights values cannot be overwritten by business expediency alone. To allow statistically supportable discrimination would undermine the intent of human rights legislation which attempts to protect individuals from collective fault. To allow discrimination simply on the basis of statistical averages would only serve to perpetuate traditional stereotypes with all of their invidious prejudices. Society has decided not to hold the individuals responsible for the sins of his or her ‘group’ and the courts must seek to further rather than restrict this decision. It is necessary to consider whether there was an alternative which in all the circumstances was practicable. Did the industry as a whole have a reasonable alternative which would have avoided discrimination.”
Similar considerations will apply in South Africa. Comparing men and women drivers will not be sufficient. Motor insurers will have to look at kilometres driven, driving experience, vehicle use, vehicle ownership and driving record. Nowadays there are sophisticated electronic devices that can be used to gather evidence that will make rating variables rational and not based on averages. A more detailed analysis of the causes of accidents is needed.
Thus, statistical averages relating to prohibited grounds of discrimination will not do if premiums are challenged unless there is literally no alternative. Insurers will have to find a way of gathering objectively determinable criteria relating to the risk insured. If there are fair, objectively determinable reasons for differentiation, insurers have to find them and apply them fairly.
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