advertising supplement to the Zimbabwe independent JANUARY 29 TOFEBRUARY 4, 2016 B5
INSURANCE Insurance is at the centre of modern society with its value and importance resulting in it being made compulsory in certain areas. Only the rich and indigent can really afford to be without insurance protection. The insurance contract is one in which in return for the payment of a premium, an insured may transfer risk of loss to the insurer. Any attempt in general to discuss the role of legislation in the transformation of Insurance law in Zimbabwe is not feasible. There has been very little legislation on the subject of Insurance Law. It is my considered opinion that the adoption of The Constitution of Zimbabwe Amendment (No.20) Act 2013 will have enormous impact on the Insurance Industry. The Constitution will play an important role in transforming Insurance Law. The Constitution of Zimbabwe now carries an expansive Bill of Rights, which introduced economic and cultural rights. The Declaration of Rights contained in Chapter 4 of the Constitution affords fundamental rights to all persons in Zimbabwe. Various Clauses in the Bill of Rights impact on the way in which insurers do business. These are the rights to privacy , right to equality , the right to access to information , and the right to a fair hearing : I shall look at the right to Equality. The declaration of rights in section 56 provides that all persons are equal before the: law and have the right to equal protection and benefit of the law. Equality is one of the cornerstones of the Constitution – “It permeates and defines the very ethos upon which the Constitution is premised”. This right may be limited in terms of law to the extent that the limitation is reasonable and justifiable in an open and democratic society based on openness, justice, human dignity, equality and freedom . The premium that the insurer charges is central to the contract of insurance. A premium is based on statistical evidence on the history of similar risks being insured in the past. Risk classification plays an important role in concluding economically viable insurance contracts. In life insurance for example, risk classification has been defined “as the process by which a company determines how much to charge for a policy according to age, occupation, sex and health”. However in terms of the equality clause, an insurer who directly or indirectly uses race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language or both to classify assessment of risk discriminates against the insured.
Insurance law and the right to equality in Zimbabwe
A mortality table is the instrument used by the insurance companies to determine the amount of a premium. A mortality table reflects the estimated rate of death of a number of people who live and die at any given age. By using a mortality table an insurer can calculate the probable life expectancy of a person at any given age and to determine the amount of premium to cover expected losses. A mortality table can be further refined by employing factors such as sex, race, and marital status, eating, drinking and smoking habits, occupation or any number of permanent factors. In this discussion I will concentrate on sex as a factor used in mortality rates and attempt to show that the use of sex as a factor in mortality tables is in conflict with the equality provision in the Constitution. Insurers in calculating premiums for life insurance, use gender-based
mortality tables. Women pay lower premiums to receive the same amount of wholelife insurance as men because the premiums they pay are received by insurers over a longer time. By contrast a gender based mortality table will require women to pay lower premiums for annuities than men for the same type of protection. While the discussion on sex as a factor in risk classification may seem theoretical, foreign jurisdictions have dealt with these issues. The United States and Canada are examples of jurisdictions in which the courts have had to decide on discrimination on account of sex. In the case of City of Los Angeles v Department of Water & Power v Manhari , the Department of Water based on the mortality rates required female employees to make significantly lessor rates to fund contributions than the male employees with the result that the female employees took less pay.
The Supreme Court if the United States held that held that even though women as a class lived longer than men, the Department’s practice was discriminatory. In the case of Arizona Governing Committee for the Tax Deferred Annuity & Deferred Compensation Plan v Norris , the Supreme Court of the United States made the following remarks; “…It is just as much discrimination because of sex to pay a woman lower benefits when she has made the same contribution as a man as it is to make her pay larger contributions to obtain the same benefits”. The Zimbabwean Courts are yet to deal with the equality clause and its effect on risk classification. Should this issue present itself it would be pertinent to note that the Constitution of Zimbabwe though advocating equality, provides in Section 48 for the imposition of the death penalty only against men. Insurers may be able to use this
factor in classifying men as higher risk justifying higher premiums. This classification of risk in this instance though discriminatory would be constitutional. Today the expectations amongpeople all over the world, and particularly in developing countries, are rising, and the judicial process has a vital role to play in moulding and developing the process of social change. If presented with this challenge , the Zimbabwean judiciary should not hesitate to deal with the equality clause and its effect on classification of risk. The Supreme Court has already given the green light for judicial activism Gubbay CJ comments thus; “Law in a developing country cannot afford to remain static. It must undoubtedly be stable, for otherwise reliance upon it would be rendered impossible. But at the same time if the law is to be a living force it must be dynamic and accommodating to change. It must adapt itself to fluid economic and social norms and values and to altering views of justice. If it fails to respond to these needs and is not based on human necessities and experience of the actual affairs of men rather than on philosophical notions, it will one day be cast off by people because it will cease to serve any useful purpose.” The traditional concept of the right to underwrite and of discriminating between categories of people is unfair. Besides being discriminatory, the practice if removed does not pose any risk to life business or pensions, so why use it? This is just an academic theory in practice meant to cause prejudice. I associate with the view of P Havenga, wherein he notes that the use of other factors such as smoking habits, alcohol consumption, weight, medical history may be used to classify individuals. It appears the use of gender based tables is discriminatory, unreasonable and unjustifiable in a democratic society and therefore unconstitutional. Nobert Musa Phiri LLB Hons (UZ)phiri@mmmlawfirm.co.zw. Partner- Muvingi & Mugadza Legal Practitioners