The European Court ruling to ban the use of gender in insurance policies has faced a barrage of criticism from the protection industry.
Master Adviser managing director Doug Brodie says: “If someone is going to live for 10 years and someone else is going to live for 15 years, then the person living for 15 years will need to pay less into their life insurance each year. That is not being fair or unfair to females, that is just basic maths, it is taught in primary schools.”
The key issue over the impact of the ruling is premium rises for women.
Kevin Carr Consulting managing director Kevin Carr says: “The ruling probably will not end up benefiting women in terms of protection.”
Women currently get lower premiums for life insurance than men because of longevity figures but women’s premiums will rise by an estimated 10-20 per cent, according to the ABI.
But while women’s life costs will rise to the same level as men’s, their income protection costs will fall. Women are more likely to claim on an IP policy, so currently pay higher premiums than men.
After the ruling takes effect on December 2012, this will no longer be a factor but does this mean that what women lose in life insurance discounts they gain in income protection reductions?
Not exactly, says Carr. “I do not think the rates will meet in the middle,” he says. “IP will not equate the loss on life cover for two reasons. First, the sales of life cover grossly outweigh the sales of IP, with 10 times more life policies being sold across the UK each year.
“Second, in life insurance the price differential is between male and female, whereas in IP it can vary. Occupation makes a bigger impact on IP premiums than sex, so it is sometimes dearer for men and sometimes dearer for women. This means there will not be anyone who definitely benefits from the European Court ruling in terms of IP and the loss of life cover will affect women more, without a doubt.”
But Brodie disagrees, not because he thinks any gains made in IP will balance out life insurance losses, but because he believes the industry is overreacting.
He says: “I do not think the rate increases in life cover for women are going to be as bad as people think. I cannot conceive that the worst-case scenario being interpreted at the moment will be enacted.
“I think all that is going to happen is the ruling is going to rattle insurers’ cages and they will go away and look at the books and say, maybe we can make these small adjustments. I don’t think Joe Consumer will see any difference in rates and women certainly will not be worse off.”
Carr says: “It is one thing saying, I am a man and she is a woman and we should pay the same for life insurance but the European Court has to realise that regulation must apply across an industry, and that is still up in the air.”
Brodie feels that further clarification is needed before the industry can decide on a course of action.
Either way, the main routes available to life providers – pulling out of the market temporarily or automatically defaulting rates to create standardised premiums – do not look like they will benefit either men or women.
Carr says: “I wonder if those two chaps from Brussels have ever regretted this can of worms they have opened.”