The Gender Directive is creating a fluid situation in protection markets, with insurers only just coming to conclusions. Andy Milburn outlines the state of play so far.
As far as we are aware, customers who reinstate their cover should be getting their original contract up and running again, so they should continue to get gender-specific rates. Feel free to argue the opposite case if you want to take on the mantle of anti-customer champion.
The same thinking can be applied to annual fixed increases, usually indexation-based premium increases on the customer’s policy anniversary, based on a fixed percentage or the retail pricing index, for example. These form part of the original contract with the customer, and should be applied using gender-specific rates if the original contract was written before 21 December 2012.
Mid-term alterations to customer’s policies are more complicated. If the alteration means that the risk taken by the insurer increases, then the new premium will probably be based on gender-neutral rates after 21 December 2012.
Most protection policies have guaranteed insurability options (GIOs) included where customers can increase their cover by a set amount without further underwriting due to a particular life-stage event.
The basis of the increase in premium will depend on the terms of the customer’s original contract. If the GIO was offered based on the original application rate written before 21 December 2012 then gender-specific rates may still be available. Intermediaries may have to check the details with the provider in these circumstances.
Increases to existing policies, other than those mentioned above, which need underwriting will see gender-neutral rates applied to the additional premium for customers increasing their cover post 21 December 2012.
As far as new customers are concerned, the two changes in legislation could result in higher premiums for most. Will this make more people buy now while stocks last? Views are mixed on this idea.
We mentioned the new business angles earlier. protection intermediaries in the UK have a few months to ensure customers who could be affected are made aware of the changes.
Plan of action
Here are six key things protection intermediaries could do in the coming weeks:
1 Create a plan for new business and outstanding applications
Providers can help intermediaries to make a list of the short-term opportunities to highlight with potential customers between now and 20 December 2012. Intermediaries could also think about how they intend to support protection customers whose applications are in the new business pipeline with providers in December 2012 (see the last point below).
2 Contact existing customers
Intermediaries might consider contacting their existing female customers who have protection policies in place to recommend they review their cover, whether it is held as a single life or joint life policy. Intermediaries could also contact female customers who have bought other financial products through them but who do not have any protection in place, (depending on marketing permissions obviously).
Men may also have to pay higher premiums on or after 21 December 2012 for new income protection cover. At the moment, women can pay 30% to 40% more than men for income protection so the potential premium increases for men could be significant.