Although it’s not a very exciting title for an article, I’m sure you’ll agree.
All insurance companies will be implementing this change in December. It will affect almost everyone, with a particular focus on women.
What is the point of it all?
In 2007, the Gender Directive ruling allowed insurers to discriminate between male rates and female rates, provided they could show statistical support.
One example of this could be that among young drivers, females are less likely to have an accident and thus receive lower insurance premiums. (The words “boy racer” come to mind).
However, the EU has ruled that this is unacceptable as it goes against the spirit of Gender Directive. Unisex rates must be introduced by 21 December 2012. The Directive was clear about eliminating different premiums from people of different genders.
That’s it.
How will this impact our lives?
Let’s look at some of the most popular issues.
Life Insurance
A female who took out life insurance had lower premiums in the past because they were considered a greater risk to the company than males. This was due to their longer lives.
With equal rates for men and women, this will be over.
Income Protection
Females with this type of insurance have had the opposite experience. Premiums are usually more expensive and sometimes more costly than for males.
The reason is that actuaries have decades worth of statistics showing that females not only claim more but also tend to claim longer.
The new ruling will mean that male and female rates will be the same. Although rates have yet to be finalized by many providers, LV has been quoted saying that female premiums will drop by 28% while men’s premiums will increase by the same amount.
It is worth noting that both of the above mentioned issues have resulted in insurance companies having to pay huge (millions) for changing their systems as a result of the Directive.
According to one provider, even though there will be clear winners, overall premiums will rise.
Cover
LV has stated that they anticipate increases in premiums for both sexes and critical illness coverage could increase by 6% and 16% respectively, perhaps reflecting the increased costs of insurance companies.
Annuity Rates
An annuity can be defined as the purchase of a pension fund that you have converted (usually in a Private Pension / Self-Invested Personal Pension).
Annuites can provide income, and include features such as spouse benefit or inflation protection. The rates currently differ between the sexes.
Females live longer than males on average, so they can only secure a lower annuity rate. This means that they receive fewer annual pensions for the same pot.
With the new unisex rates, this will change.
Prudential stated that a male with a PS50,000 retirement pot will retire at 65 and receive PS2,506 per year.
Under the new rules, however, this will decrease to PS2,467. Females in similar positions will see their income rise from PS2,277 towards PS2,467, an 8.3% increase.
Car Insurance
Young men will be the greatest gainers, while young women will be the biggest losers. However, it is unclear how this will translate into premium rates.
It should not make a difference for drivers over 30 years old.
Key Considerations
With new income protection applications and the amount they receive for their pension pot, women are sure to win.
It looks like they’ll be losing on car and life insurance.
