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De Jure

versión On-line ISSN 2225-7160
versión impresa ISSN 1466-3597

De Jure (Pretoria) vol.51 no.1 Pretoria  2018 



Disability discrimination in insurance


Gestremdheidsdiskriminasie in versekering



Birgit Kuschke

BLC LLD; Associate Professor, University of Pretoria




Diskriminasie in die finansiële sektore soos versekering word nie alledaags onder die loep geneem nie. Die een industrie waarin daar daagliks teen persone gediskrimineer word, is versekering. Versekeringsmaatskappye groepeer versekerdes in verskillende risikogroepe volgens hulle risiko-profiele. Die omvang van risiko word meestal volgens die groep se algemene of gemiddelde kenmerke bereken. Versekerdes wat nie noodwendigerwys dieselfde risiko as ander lede van die groep inhou nie, word hierdeur benadeel deurdat hulle hoër premies betaal of verminderde dekking of voordele geniet. Die optrede deur die versekeraar stel prys-, transaksie- en statistiese diskriminasie daar. Dikwels oorvleuel die gronde vir 'n bepaalde groepering met verbode gronde van diskriminasie soos onder andere in die Grondwet uiteengesit. Faktore wat die meeste ter sprake kom, is gestremdheid, ouderdom, en geslag. Die ongeregverdigde diskriminasie affekteer die versekerde se regte op gelykheid en waardigheid.
Vanweë die ontelbare vorme en grade van gestremdheid, is dit uiteraard vir versekeraars moeilik om voldoende inligting in te win en om volgens elke aansoeker se unieke persoonlike omstandighede 'n billike toedeling te maak. Aan die ander kant, moet alle versekerdes ook dieselfde behandel word, en uitsonderings kan verswarend op ander lede van die groep inwerk. Hierdie probleem regverdig egter geensins onbillike diskriminasie nie.
Die probleem lê daarin dat daar onsekerheid heers oor wat wel geregverdigde diskriminasie of differensiasie daarstel. Versekering speel 'n belangrike rol in ons samelewing, en verswarende verpligtinge om dekking, premies en bedinge van geval tot geval aan te pas kan die versekeringsbedryf se winsgewendheid bedreig. Ander lande probeer die probleem deur teikengerigte versekeringswetgewing bestuur. Dit is egter nie die geval in Suid-Afrika nie, en kan 'n beroep op die wetgewer gedoen word om oorweging daaraan te skenk om 'n groter mate van regsekerheid in die voorgestelde nuwe versekeringswetgewing te skep, deur gevalle wat as direkte onbillike diskriminasie geag word, te identifiseer. Die voorstel is dat voorskrifte in ondergeskikte wetgewing soos Polishouerbeskermings-reëls ingebou word, ten einde vinniger aanpassings en wysigings wat met mediese en tegnologiese vordering wat gestremde persone se risikoprofiele verbeter, tred hou.



1 Introduction

The idea of human rights in essence is a belief in the existence of a form of justice that is universally valid for all people. All sectors, public as well as private, are bound by the human rights to equality and nondiscrimination.1 The right not to be discriminated against due to a disability is addressed in the United Nations Convention on the Rights of Persons with Disabilities (hereafter the 'Convention').2 The discussion below deals with issues raised in the Convention specifically in the context of insurance discrimination.

Discrimination in a social or socio-economic context has been part of the daily narrative.3 Discrimination in a purely economic sense, such as in the financial sector, however has not enjoyed as much attention.4Discrimination is mostly regulated within the health, welfare and employment frameworks.

Insurance is the industry in which people are dealt with in a discriminatory manner the most on a daily basis.5 In a foremost case heard on discrimination in the insurance industry, the Supreme Court of Canada recognised in Zurich Insurance Company v Ontario, Zurich Insurance Co v Ontario Human Rights Commission6 that '[a] fundamental tension between human rights law and insurance practice exists.' South African case law on insurance discrimination is scant, as cases often settle out of court.7 To date no case law has been reported in our courts on disability discrimination in insurance.

Insurance companies in fact are in the business of discrimination when they segregate insureds into different risk groups or pools based on their risk profiles. Insurance companies are unable to price risks that they cannot analyse, assess or quantify, a practice which necessitates some form of arbitrary grouping or classification. Sometimes the act of classification coincides with discrimination on a prohibited or unjustified ground, such as race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language and birth.8 Such discriminatory conduct potentially infringes on the fundamental right to dignity.9

The degree of risk inevitably is determined on the basis of a specific group's common or general characteristics which are material to the risk. Some insureds placed in a group do not necessarily share the average characteristics of that group, with the result that the rate they pay or the extent of the insurance cover is discriminatory.10 The Convention recognises the diversity of persons with disabilities, which makes groupings difficult.11

Discrimination in insurance most often is based on age, gender and disability.12 Disabled or elderly persons seem mutely to accept a generalised grouping, often unaware that such a classification can be challenged and that standard-form or adhesion insurance contracts are not cast in stone and may be amended.13 The Convention stresses the importance of accessibility to information and communication, in enabling persons with disabilities to fully enjoy all human rights and fundamental freedoms.14 Finally, to add insult to injury, disabled persons might be discriminated against in the context of insurance on more than one factor.15

Inequality potentially affects the validity of a contractual clause, as it may be contrary to public policy to enforce an agreement that was entered into while the person laboured under the inequality.16 The South African Supreme Court of Appeal, since the judgment in Barkhuizen v Napier, has accepted that there can be 'a constitutionally-inspired public policy challenge to the enforcement of a prima facie reasonable contractual term'.17 On the other hand one should always keep in mind that contractual autonomy to voluntarily consent to a specific categorisation and cover is a part of the rights to freedom and to dignity.18

It is a common understanding that insurers should be able to differentiate, but that not all types of discriminatory differentiation by insurers should be tolerated. The issue is how to identify acceptable grounds for differentiation and what are the limits for legitimate economic discrimination. The discussion below aims to comment on some of the issues pertaining specifically to the insurability of persons with mental or physical disabilities, but does not attempt to provide a comprehensive analysis.


2 Nature of insurance discrimination

The United Nations Human Rights Committee states: 'The term discrimination should be understood to imply any distinction, exclusion, restriction or preference which is based on any ground[s] and which has the purpose of nullifying or impairing the recognition, enjoyment or exercise by all persons, on an equal footing, of all rights and freedoms.'19The UN Convention on the Rights of Persons with Disabilities (hereinafter the 'Convention')20 that was signed and ratified by South Africa in 2007 describes 'discrimination on the basis of disability' as meaning 'any distinction, exclusion or restriction on the basis of disability which has the purpose or effect of impairing or nullifying the recognition, enjoyment or exercise, on an equal basis with others, of all human rights and fundamental freedoms in the political, economic, social, cultural, civil or any other field'.21

Discrimination in the insurance industry clearly falls within these broad descriptions, yet mostly is justified as a form of personalisation of the insurance product. This claim allows insurers to maintain financially sound underwriting policies, to bring competitive offers to the market and it enables insurers to charge different premiums for the different risk profiles. Preventing poor market performance within an essential sector of the economy and promoting business efficiency and profitability and, on the other hand, acting fairly towards all insurance consumers when underwriting, poses a challenge for the industry. Insurers should take cognisance of the fact that their conduct may be unconstitutional and may affect the policies they issue.22

In order to maintain equity among insured persons, clearly each policyholder should be charged a premium rate proportional to the actual risk he or she transfers to the insurance fund.23 If one person is allowed to pay less than his or her proportional share to prevent discrimination, necessarily this will lead to an overcharge against other persons, again creating inequality and a type of reverse discrimination.24

In insurance discrimination usually is based on universal generalisations such as the physical and physiological health status of the individual, but not on individual traits. Broad classifications include temporary, permanent, partial or recurring disabilities. A cause for concern has been raised in the case of the so-called 'marginal cases': where persons are merely temporarily lacking in the criteria required for proper risk differentiation. This definition applies especially to some mental disabilities. Examples include individuals who in the past have been diagnosed as suffering from epilepsy, dementia and schizophrenia, yet, who upon full recuperation, fail to procure sufficient cover due to their past medical history.

Discrimination in insurance is seen primarily as a form of price discrimination where higher rates are charged for minorities, or as deal discrimination where some minorities do not qualify for or are not offered the same extent of services or goods. The access offered to disabled persons to personal injury or medical insurance cover serves as an example.25

Discrimination in insurance furthermore is a form of statistical discrimination, based on a theory of stereotyping. Inequality and the preferential treatment of some persons can be classified as statistical discrimination because stereotyping may be based on the average behaviour of a specific risk group.26 Theoretically, an insurer is inclined to substitute group averages in the absence of direct information about a certain fact, characteristic or ability. This factor causes the unfair discrimination of atypical individuals from a disadvantaged group. One cautions that not all categorisations or groupings necessarily lead to prejudice, a consequence which renders them incontestable.27

Statistical discrimination often is applied and tolerated, for example when older people are charged more for life insurance, when people with a medical history are charged more for health insurance and when disabled drivers, who are quite capable of driving a vehicle safely and competently with adapted controls, are charged more for car insurance.

The modern insurance consumer's intolerance of discrimination in insurance became clear in the Test Achats case28 in the EU where gender distinction in the calculation of motor insurance premiums was held to be discriminatory. This ruling truly put the cat amongst the pigeons. Many countries allowed insurance companies to charge men and women with identical driving records different rates or to factor in gender when deciding whether to deny coverage. Although an attempt to attain optimal equality, the judgment in this case violates the primary insurance principle that risk must be calculated by taking all relevant information into account, and that one cannot treat all persons and all risks equally.29

Rather than using general factors the insurer should assess the risk of the individual insured, applying appropriate and neutral rating variables suited to the particular circumstances and attributes as well as to the behaviour of the individual seeking insurance. This practice would require a much more intensive risk evaluation and literally would require the insurer to create bespoke insurance cover for each applicant. It is submitted that such an approach theoretically gives effect to the right to equality, but is not necessarily practically feasible.

Although insurers must be allowed to complete realistic risk assessments, they should respect principles of transparency, antidiscrimination, proportionality and good customer policy, such as Treating Customers Fairly or 'TcF'.30Discrimination should be avoided unless it is justified by a legitimate aim, and if the means of achieving it are appropriate and necessary demonstrating a reasonable proportion between the differentiated treatment and the aim pursued.31 Rather than outright exclusion, various techniques can be applied to personalise the insurance product and discriminate to a lesser degree. These techniques include premium adjustments, selection of benefits, deductibles or the provision of or recommendation to procure alternative cover.


3 Equality in South African insurance practice and legislation

After the UN Convention on the rights of Persons with Disabilities(hereafter the 'Convention')32 was signed and ratified by South Africa in 200733 only national laws needed to be developed in accordance with the Convention. There is no separate statute that deals in general with the rights of disabled persons.

As supreme law in our country the right to equality as set out in section 9 of the Constitution renders discrimination on one or more of the listed grounds unfair unless its fairness is established.34 In order to prove that the discrimination is fair, one must take into account whether it reasonably and justifiably differentiates between persons according to objectively determinable criteria that are intrinsic to the activity concerned.35 The following aspects need to be taken into consideration:36 (a) whether the discrimination impairs or is likely to impair human dignity; (b) the impact or likely impact of the discrimination on the complainant; (c) 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; (d) the nature and extent of the discrimination; (e) whether the discrimination is systemic in nature; (f) whether the discrimination has a legitimate purpose; (g) whether and to what extent the discrimination achieves its purpose; (h) whether there are less restrictive and less disadvantageous means to achieve the purpose; (i) whether and to what extent the respondent has taken such steps as being reasonable in the circumstances (i) to address the disadvantage which arises from or is related to one or more of the prohibited grounds or (ii) to accommodate diversity.

Discriminating factors that apply specifically to insurance products and services provided to persons with disabilities are identified as: (a) unfairly refusing on one or more of the prohibited grounds to provide or to make available an insurance policy to any person; (b) unfair discrimination in the provision of benefits, facilities and services related to insurance; and (c) unfairly disadvantaging a person or persons.37These are generalised provisions that provide no clear guidelines to the industry and insurance applicants so as to attain legal certainty as to the extent to which categorisation is found acceptable.

Within the last decade Kok recognised that these statutory provisions are insufficient to address the problems facing discrimination in insurance, and has urged that legislative reform is required in this regard.38 Internationally the drive to introduce more specific insurance legislation to address this insufficiency proves this point. These developments will need to be in accordance with article 4 of the Convention, promoting non-discriminatory