Gender neutral insurance update

What's the current state of play re: insurance premiums ahead of the 21 December deadline banning gender from influencing premiums?.

The 21 December deadline for insurers to stop varying insurance premiums based on gender looms. To recap, a ludicrous Eurocrat decision means insurers will no longer be allowed to use facts such as women (on average) living longer than, or having fewer car insurance claims than men when calculating insurance premiums.

Should you take any action before 21 December? Let's take a look at the main types of insurance affected to see the current state of play. My estimates for rates/premiums under the new rules assume business is split 2/3rds to 1/3rd between men and women, which might be incorrect, but these figures nevertheless give a reasonable guide as to what will probably happen.

Pension Annuities

Annuities are effectively a bet with the insurance company on how long you'll live. Because women tend to outlive men their annuity rates have historically been lower.

A quick look at current annuity rates suggests some insurers (e.g. Aviva) have already adopted gender neutral quoting, while others such as L&G are still offering better rates for men. However, in the example I ran Aviva's rate came out top for both men and women, suggesting (for the moment at least) both are getting a good deal.

Figures show annual income from a £100,000 level single life pension annuity for a non-smoking 65 year old:

	Aviva	L&G	Age Expectancy
Male	£5,518	£5,515	86 years
Female	£5,518	£5,193	88.3 years
Current annuity rates sourced from MAS Comparison tables.

Once the market settles down I'd expect women will receive a higher annuity income compared to gender-based quotes while men will see their income fall (other things being equal). However, shopping around remains vital and could certainly help mitigate the reduction for men and further boost income for women.

If you're a male pondering whether to buy an annuity before 21 December then it's certainly worth getting some quotes, but it doesn't look rates will fall off a cliff overnight.

Life Insurance

Life insurance policies are also a bet on how long you'll live, so women generally enjoy lower premiums than men at present. No gender neutral pricing as yet, so we can still only guess the extent of any change.

Figures show monthly premiums for a 20 year level term assurance policy with £200,000 of cover for a non-smoking 30 year old:

	Current	Estimated new	Probability of dying before 50	Estimated cost difference over 20 years
Male	£7.81	£6.81	1 in 28	-£240
Female	£6.32	£6.81	1 in 48	+£120
Current premiums sourced from Cavendish Online.

The new rules will likely mean women getting the short straw, with higher premiums, so buying a policy under current rules might be sensible, provided the premiums are guaranteed to be fixed throughout the term. By contrast, men should enjoy lower premiums after 21 December 2012.

Income Protection

Although women tend to live longer than men, they are more likely to suffer from illness necessitating extended time off work. So income protection premiums have historically tended to be more expensive for women than men.

However, having run some quotes many income protection insurers appear to have already built in gender neutral pricing, so men and women receive the same quotes (everything else being equal). Nevertheless, if you're a male looking to buy such a policy it's worth getting some quotes before 21 December to see whether you can get a competitive deal from one of the few insurers who, quite sensibly, still vary quotes based on gender (there are plenty of online comparison brokers, just google).

Car Insurance

Despite male jokes about women drivers, females actually have fewer claims (on average) so their car insurance premiums are generally lower than men's.

Because car insurance quotes can vary so widely I haven't run a comparison here, but industry consensus seems to be that premiums for women could rise by 25% or more under the new rules, while men's premiums will generally fall. The trouble is because car insurance premiums are reviewable each year there's no way of locking into current rates long term .

Is there any way for insurers to get around this?

Insurers might be able to retain a link between insurance premiums and the likelihood of a claim being made via tighter underwriting. For example, professions, postcodes and health history could have a greater influence over certain premiums than they do at present. And those professions which tend to be dominated by one gender or the other could be ripe for some 'closet' insurance premium sex discrimination.

Read this article at http://www.candidmoney.com/articles/262/gender-neutral-insurance-update