ARECENT ruling in the European Court of Justice (ECJ) will have a knock on impact on the cost of a wide range of insurance products with effect from December 21 next.
The case was brought to the ECJ by a Belgian consumer rights group which had challenged the use of gender in the pricing of annuities on the grounds that it is incompatible with EU directives. The ECJ decided that pricing based on gender is a form of discrimination. The ECJ now want insurance companies to eliminate the use of gender as a factor in pricing insurance products and have given the industry a deadline of December to be prepared for this change.
The insurance industry and the underwriters argue that gender is a real factor in assessing and pricing the level of risk underpinning an application for insurance. Insurers believe that they are not discriminating on the basis on gender because they can back up their decision with statistics.
For example, women are statistically more likely to claim under an Income Protection policy during their working life and hence the cost of Income Protection for women is more expensive than it is for males. The new ruling should therefore reduce the cost of Income Protection for women and will increase the cost for men. For any males out there considering taking out Income Protection, now would be wise to do it before the changes come into effect. Policies in place before Dec 21 are not affected by changes in price so you could effectively lock in to the cheaper rate now.
Statistically women are better drivers (although many men love to argue this point!) and have enjoyed cheaper car insurance as a result of these statistics. After December 21, however, the cost of car insurance will increase for women, despite their superior driving abilities!
Life cover statistics have traditionally favoured women over men in terms of price, because women live longer than men. This is statistically proven, according to the insurance industry, but the ECJ believe it amounts to discrimination and as a result the cost of life cover for women is set to rise, while males can see a slight reduction. Again, any women out there, perhaps mothers who feel they do not have sufficient life cover in place, should consider their options before December.
While you might be thinking that, for a couple for example, the increased cost of insurance for one will be offset by the reduction in the cost of the other, feedback from the industry tells us that will not be the case. While the cost for women (to use the example of car insurance) will increase, the decrease for males will be marginal. The insurance company will not risk being exposed to a high number of claims (the amount statistics tell them to expect) that they are not being adequately compensated for. Hence a couple are likely to pay more overall for insurance.
Other areas to consider are the likes of annuities for those approaching retirement. The interest rate offered for an annuity has traditionally been higher for males than females. This is because females are statistically likely to live longer so the annuity provider expects to pay the pension income for longer to females than to males. As a result they are happy to offer a higher income to a male as they don't expect to pay it for as long as they would his female counterpart. Again if you are a male considering purchasing an annuity, the advice would be to act this side of December 21.