Insurers must stop setting prices based on gender, an EU court ruled, in a move that could raise costs for women drivers, cut male pensions and invite more legal challenges to pricing practices.

Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination, the European Court of Justice said on Tuesday.

It told insurers to adopt a unisex approach to setting premiums from December 21, 2012, confirming a recommendation from its senior adviser in September.

Insurers said the decision could push up motor insurance costs for women, who currently pay less than men because they are statistically less likely to be involved in accidents, by up to 25 percent.

The ruling could also reduce retirement annuity payments to men, who currently get more than women to take account of their lower average life expectancy.

The ECJ's decision drew condemnation from the industry, which said differential pricing for men and women was legitimate given their different risk profiles.

Europe-wide the effect on the price and benefits and on the choice of insurance products for consumers could be significant, the CEA, Europe's insurance industry lobby, said, adding it was deeply disappointed by the ruling.

Analysts said the decision would have little impact on insurers' earnings as they had enough flexibility over pricing to ensure any changes would cancel each other out.

From the consumer perspective it is going to make a difference, but my sense is that the insurers will change their rating to maintain their current level of profitability, said Espirito Santo analyst Joy Ferneyhough.

The Stoxx 600 European share index was flat at 7:45 a.m. EST, in line with the wider market.

AGE NEXT?

The gender ruling could pave the way for a potentially more damaging legal challenge to insurers' reliance on their customers' age in setting prices and payouts.

Of greater concern to the industry is the likelihood there will be further European challenges, particularly around age, said Mark Winlow, head of general insurance at accountants KPMG.

This is a more significant factor than gender, as age is used much more widely to differentiate risks.

Sheila's Wheels, a British motor insurer that markets itself to women drivers, said it did not expect a major impact from the ruling. We are protected by the sheer number of women on our books, which will not change overnight, a spokesman said.

(Additional reporting by Cecilia Valente and Sarah Mortimer in London; Editing by Rex Merrifield and Andrew Callus)