Motor-vehicle Insurance and Discrimination: A Comparative Analysis of the Acceptability of Actuarial Evidence

• Jurisdiction: South Africa
• Published date: 25 May 2019
• Date: 25 May 2019
• Author: Anthea Natalie Wagener
• Pages: 376-391

Motor-Vehicle Insurance and Discrimination: A

Comparative Analysis of theAcceptability of

Actuarial Evidence

ANTHEA NATALIE WAGENER*

University of South Africa

1 Introduction

South African insurers have recently been alerted to the possibility that they

may not inevitably be allowed to discriminate based on age and gender to

determine insurance premiums.

1

A recent decision of the European Court of

Justice found that from 12 December 2012 the countries of the European

Union will be prohibited from using gender as an insurance-rating variable.

2

It

is unknown whether a South African court would come to a similar

conclusion, as this matter has not yet been decided by a South African court.

Discrimination is inherent to insurance. Insurers use actuarial statistics,

such as those based on age and gender, as rating variables to differentiate and

distinguish for purposes of risk classif‌ication. Insurers justify their use of

actuarial statistics due to its accurate prediction of risk. The question of unfair

discrimination arises when, based on a prospective insured’s gender or age, an

insurer rejects an application for insurance or imposes more stringent

conditions than usual. It is often found in practice that motor-vehicle insurers

offer women drivers lower motor-vehicle insurance premiums, as they are

regarded as constituting a lower risk than their male counterparts.

3

Also,

young adult drivers below the age of 25 are seen by insurers as posing a

higher risk and are accordingly charged higher premiums.

4

The purpose of this article is to analyse South African courts’ acceptability

of actuarial evidence for purposes of motor-vehicle insurance risk classif‌ica-

tion. Our courts may need to consider whether actuarial evidence is

acceptable in determining if the use of age and gender rating variables

amounts to unfair discrimination. This article examines the f‌indings of

* LLB (Pret) LLM (Unisa). Lecturer in Banking Law, University of South Africa, Pretoria. e-Mail:

wagenan@unisa.ac.za.

1

RW Vivian ‘Gender Discrimination and Insurance: Economists versus Lawyers’April 2011 Cover

Magazine at 36; C Fourie ‘Gender Ruling Unlikely to AffectSouth African Motorists’ April 2011 Cover

Magazine 40.

2

Case 236/09. See http://curia.europa.eu/jurisp (last visited on 27 June 2011).

3

For example, the company prof‌ile of 1st For WomenInsurance Brokers (Pty) Ltd states that ‘1st For

Women Insurance Brokers has always maintained that women are safer and more responsible drivers

than men. In other words, women are a better insurance risk and can therefore benef‌it from lower

insurance premiums’. See http://www.1stforwomen.co.za/company-profile.asp (last visited on 27 June

2011).

4

For example, a 27-year-old male would pay R210.00 less on his motor-vehicle insurance premium

when compared to a similarly situated 24-year-old male. Quote obtained from http://

www.autogen.co.za/ equote.asp (last visited on 10August 2011).

376

(2011) 23 SA Merc LJ 376

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American and Canadian courts in determining this same issue, and provides

recommendations for a motor-vehicle insurer, an insured and a South African

court. However, f‌irstly, a brief note on the Promotion of Equality and

Prevention of Unfair Discrimination Act

5

(‘the Equality Act’) will follow.

2 The Equality Act

Item 5 of Schedule to the Equality Act identif‌ies three illustrative practices

in the insurance industry which may possibly be considered to amount to

unfair discrimination.

6

The second practice listed in Item 5 is of particular

relevance for age and gender discrimination as it prohibits ‘unfair

discrimination in the provision of benef‌its, facilities and services related to

insurance’. It identif‌ies this type of discriminatory insurance practice,

specif‌ically, the placing of an advantage or disadvantage to persons based on

age and gender, to be possibly unfair. Should a South African court f‌ind that

the practice of charging higher premiums to males and to younger drivers is

unfair under this Item, insurers would not be allowed to discriminate based on

age and gender.

The Equality Act sets out a test to determine whether discrimination is

unfair. Brief‌ly, the test for unfair discrimination is as follows: Section 14(2)

requires that a number of factors must be taken into account in determining

whether or not the respondent has proved that the discrimination is fair. The

factors that have to be considered are (a) the context; (b) the factors referred

to in section 14(3); and (c) whether or not the discrimination reasonably and

justif‌iably differentiates between persons according to objectively determin-

able criteria that are inherent to the activity concerned.

Section 14(2)(b) requires that the list of nine criteria to determine whether

or not the respondent has proved that the discrimination is fair, which is set

out in section 14(3), has to be considered by a court. This list, which is not

exhaustive, includes the following: whether the discrimination impairs or is

likely to impair human dignity; the impact or likely impact of the

discrimination on the complainant; the position of the complainant in society

and whether he or she suffers from patterns of disadvantage or belongs to a

group that suffers from such patterns of disadvantage; the nature and extent of

the discrimination; whether the discrimination is systemic in nature; whether

the discrimination has a legitimate purpose; whether and to what extent the

discrimination achieves its purpose; whether there are less restrictive and less

disadvantageous means to achieve the purpose; and whether and to what

extent the respondent has taken such steps as being reasonable in the

circumstances to address the disadvantage which arises from or is related to

one or more of the prohibited grounds, or to accommodate diversity.

5

Act 4 of 2000.

6

See also C Albertyn, B Goldblatt & C Roederer (eds) Introductionto the Promotion of Equality and

Prevention of Unfair Discrimination Act, Act 4 of 2000 (2001) 115.

ACCEPTABILITYOF ACTUARIAL EVIDENCE 377

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