Having talked previously about the need to get business before G-Day, it is time now to look ahead to life after 20 December.
However, before I get into this, I am contractually obliged by the insurer’s code to do a quick reminder on the changes on G-Day.
With few exceptions we expect life and critical illness rates to increase on G-Day. This is due to moving to unisex rates and a change in life office taxation.
Rate increases will be highest for females, widely quoted as being in the order of 20-25 per cent, though I will be providing more detail on this in my next article. IP rates are also affected by the gender ruling, with male rates increasing and female rates falling.
As with many rule changes there are winners and losers in furtherance of a common aim.
New policies have to complete before G-Day to get gender-specific rates, though details differ between insurers. Insurers are also taking different approaches to ensuring that as few cases as possible are left in the pipeline. For example, at Aegon we are quietly getting on and tackling the issue with a dedicated pipeline servicing team.
Now, onto my own specialised subject of underwriting. You know you want to hear about it!
Currently underwriters think about gender in relation to specific illnesses and when evaluating the results of specific tests. In this we parallel doctors who need to know the sex of a patient when considering what is wrong with someone and how to treat it.
The sex of a person can affect their susceptibility to a certain disease, the course that that disease might take, how it is measured and how it is treated. Blindingly obvious stuff, but in the world of EU Directives the obvious is not always sufficient to justify its acceptability.
If underwriters had to forget about sex when underwriting, apart from being more productive, they would come up with some very strange results.
As an example many lab tests, for example Liver Function Tests, have gender-specific interpretation due to the different physiology of men and women (they’re built differently). Ignoring gender would mean we would have to assume that men had standard results when they did not, and vice versa. The tests would become unusable. We might be able to work around that, but what would we do with a GP report where the doctor, in making a diagnosis, had used a gender-specific lab result as part of the evidence?
A further complication arises as if we did use unisex ratings then the result might be to inadvertently rate far more males than females, or vice versa, which could lead to issues of indirect discrimination. And the directive bans indirect discrimination. All in all, a potential nightmare.
Fortunately, the EU has provided guidance on implementing the Gender Directive, with specific consideration of life underwriting. Its view was that ratings based on the physiological differences between the sexes were permitted. The result of this is that with only a few minor exceptions, current underwriting practices can remain unchanged.
With so much regulatory change going on currently, my expectation is that most insurers will take advantage of the guidance to make no discernible changes to underwriting on G-Day. This may change in future, especially if insurance underwriting practices become the focus of legal challenge somewhere within the EU, but for the moment it’s one less issue to worry about.
After this island of calm in a sea of change, my next article will dive into premium rates post G-Day.
Mark Preston is head of underwriting at Aegon UK