The health insurance and protection market covered
HMT: Gender neutrality to cut insurance sales
Introducing gender-neutral rates will result in premium hikes for life insurance and critical illness (CI), HM Treasury has warned.
HMT also expects a reduction in insurance sales and cause greater reliance on state support and more intrusive underwriting processes including full health assessments and longer times to purchase products.
It believes three key effects will result from the European Court of Justice's (ECJ) decision to outlaw gender based pricing from 21 December 2012.
These are cross-subsidisation between genders, adverse selection increasing the cost of insurance generally and incentivising riskier behaviour and, with regards to motor insurance, worsening road safety.
HMT issued the warning as part of its consultation on implementing the ECJ's ruling and estimated that life insurance premiums will rise by 10% to 15% per year and CI policies by 12%.
‘Overall, we expect insurers will take a cautious approach which assumes a high mix of the riskier gender in a particular pool, therefore, we do not expect any gains through lower premiums to match the increases,' it said.
'A change to gender neutral pricing and premiums is also likely to have reputational impacts on the industry and there is also likely to be a reduction in the purchasing of private insurance policies.'
Although cross-subsidisation between genders has been widely predicted, HMT said it will also introduce adverse selection, which will operate to increase the cost of insurance generally and incentivise riskier behaviour.
‘If gender neutral pricing is introduced into life assurance, men (who have on average a lower life expectancy) will find life insurance to be good value and will be incentivised to buy it or buy more,' it continued.
‘On the other hand, women (who have on average a higher life expectancy) will find life insurance poor value and will be disincentivised from purchasing such insurance.
‘As fewer low risk people (i.e. women) take out life assurance, then the insurer's portfolio becomes increasingly risky, and the cost of insurance has to rise to compensate,' it added.
In the annuities market it is expecting few benefits to result, with male annuities potentially falling by 13% per year.
And Treasury is particularly alarmed by the possible knock-on effects to road safety.
It said studies have found that gender-neutral pricing as premiums for generally higher risk male drivers fall, they may purchase higher-powered cars or increase the riskiness of their driving.
It concluded by saying that the UK will still be privy to one of the most competitive insurance markets in the world and the market is, likely to eventually stabilise on average higher than before.
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Drivel
Ian, your thread is just plain wrong! How can sex not be a factor? http://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy Im not suggesting Insurance companies should refer to wikipedia for their statistics but i would imagine its fairly accuarate. If women live on average to an older age...then their is a lower chance they will die within a certain time frame than men. Its common sense. Im all for insurance companies thinking outside the box, i read somewhere they they should do it on shoe size on the basis that men have bigger feet than women - probably a little bit of tongue in cheek there but using peoples sex seems like a logical thing to include in health insurance.
Posted by: Tony | Dec 14 2011
Gender rating alternative
The drivel above, ignores the fact that risk pricing is more accurate today than it ever was. This EU ruling is plainly interference in the market and has the effect of turning the clock back to what is now considered outmoded risk pooling. Inevitably the rates for all will rise as a result. Short of 'black boxes' in cars to charge according to how it is driven, what it will not do is help anyone save money despite being in a proven lower risk groups.
Posted by: iprotectinsurance | Dec 13 2011
Drivel
I wish more contributors would prefix their comments with an appropriate title
Posted by: Dave Stone | Dec 13 2011
Drivel
I wish more contributors would prefix their comments with an appropriate title
Posted by: Dave Stone | Dec 13 2011
drivel
What utter and complete drivel from HMT with no evidence -just another EU bash. The gender ruling did not make new law -all it did was point out that a deal that insurers made to buy them time to change their rating models was kept going long after the sell by date. If the evidencefor gender pricing was in a murder trial,the case would not get past the first hearing as the evidence does not and never has stood up. Insurers have been coasting on lazy stereotypes on age and gender for many years - pretending that insurance myth is fact. The consultation is window dressing It is very very simple - you cannot use gender to alter the price, the benefits, the excess , the acceptance level or anything else. Insurers had years to sort it out, but lazily thought the govt, abi et all would magically protect them . Read the full case, not the garbage written about it. Read what various analysts have said about the need for proper risk pricing models in every class Typical insurance hysteria - and mythology ' all actors and journalists are bad risks ' etc It is no fairer to rate on sex than it is on colour. If the only stats you keep are on age and sex, then you will have 'evidence '- but there are many better rating factors of lifestyle,work, height, weight,miles driven - and others that insurers can use. None of the 'risk evidence ' stands up to scrutiny. Insurers and brokers - stop whinging that you got caught out as old-fashioned -no other industry would use the limited 30/40 year old data sets that it uses. Look on the age and gender rules as an opportunity to think out of the box, rate on real risk factors, and stop moaning about how it the fault of those nasty Europeans. A great opportunity to move away from lemming like granny says ratings - and all this industry does is what it does best- whine , whinge and blame everyone else for its own deficiencies.
Posted by: Ian Youngman | Dec 13 2011
We knew all this would happen
It's a pity that the Government didn't try harder to prevent this from going through the EU in the first place. Talk about Vetoes.....
Posted by: Roger Edwards | Dec 13 2011
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