News analysis
21
Fair or equal? Soon women could have to pay more for life cover as a result of an EU ruling on gender and insurance
IMPACT – WHAT WILL THE EU RULING ON GENDER MEAN ON A DAY-TO-DAY BASIS?
PRODUCT Private medical insurance (PMI) is expected to be less affected by the ruling than protection, given the fact that gender is less often used in pricing. Bupa confirmed toHealth Insurance that gender is not used to calculate premiums. However, a spokesman for Exeter Family Friendly said the ruling would affect
one of its PMI plans and AXA PPP healthcare confirmed that it does take gender into consideration when setting premiums for some individual policies, although the weighting is “relatively small” and is not applied to the “vast majority” of policies. These will be reviewed during the transition period, said a spokesman. Partnership’s Steve Groves said the impact of the ruling on long-term care
would be “more muted”, given the fact that the majority of lives are female. “However, we suspect some males considering the product in the final
quarter of 2012 will wish to ensure they have completed applications before the new rules come in,” he added. The firm would be spending “significant” amounts of time analysing its
data to find rating factors other than gender to remove uncertainty in the end underwriting ratings which the removal of gender will create, he said. It is not yet certain whether these will be implemented before December 2012.
PRICING The brunt of the court’s ruling will be felt by the protection industry, where gender is routinely used to assess risk and price premiums. It remains to be seen when providers will introduce unisex premiums, or how these will compare in terms of price. Laura McMaster, partner at consultancy firm Lane Clark & Peacock, said that by preventing gender from being used to set premiums, the
ECJ was forcing insurers to cross-subsidise the cost of claims between men and women. “If an insurer does not get the level of cross-subsidy between their
policyholders right then it could seriously threaten their profitability,” she said. “This is not just about getting the maths right. If the mix of policyholders changes then the level of cross-subsidy will need to change, and this mix will be largely out of the insurer’s control if they are not allowed to price based on gender. The likely result is that insurers will be left with no alternative but to increase average premiums to compensate for this new uncertainty.” “Insurers are required to act in a prudent manner, to ensure they are able
to meet all their liabilities in the future, so the one thing which is certain is that the outcome will not be aggregate pricing at half way points between male and female rates,” said Alan Joynes of Swiss Re. He believes the ruling may encourage insurers to come up with alternative
ways to differentiate premiums but warned that indirect discrimination – based on gender – would be precluded by the ruling. Phil Brown of Zurich does not believe that proxies for gender will be permitted. While a flurry of repricing might be on the horizon, either before the
December 2012 deadline or at it, Roger Edwards of Bright Grey and Scottish Provident believes the priority is to get consumers protected now. “There are enough people who have not got insurance that we should not
put ourselves in a position where we use it as an excuse to not talk about protection,” he said. “If the price changes in 21 months’ time and someone can get a better deal elsewhere that’s not that much different to what they can get now – rate repricing happening all the time. Let’s get them the protection they need rather than worrying about whether the premium might go up and down.
LIFE OFFICES GETTING ON WITH BUSINESS
“There are enough people who have not got insurance that we should not put ourselves in a position where we use the ruling as an excuse to not talk about protection” Roger Edwards, Bright Grey and Scottish Provident
April 2011
www.hi-mag.com HealthInsurance
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