In theory, gender equality is something all women strive for. In practice, however, it may not always be welcome. Take insurance. For years women have had the upper hand over men, typically benefiting from lower premiums thanks to their longevity and better safety record on the roads. Now, however, Brussels has ruled that price differentiation based on gender is not acceptable.
Introduced on December 21st, the gender directive is a result of a test case taken by a Belgian consumer group, Test-Achats, which resulted in the EU Advocate General ruling that gender specific benefits are illegal.
The directive applies to all insurance contracts, but will have the greatest impact on those that have offered different prices based on gender, such as motor insurance, life assurance and pension annuities. If you currently have an insurance contract, then there will be no impact, but when you go to renew or take out a new policy you will be offered one on a “unisex” basis.
So, almost one month on from its introduction, what impact is it having on insurance premiums?
Life assurance
Given that women tend to out-live men in greater numbers, up until now they have benefited from less expensive life assurance premiums.
The discount women received was typically about 25 per cent, which meant a substantial saving over the life of the product. On a protection plan worth €150,000, for example, a woman could have saved almost €4,000 over the course of a 25-year plan.
Now however, this is changing, albeit slowly, according to Sharon Doyle, a director at Lowcommission.ie.
“Initially when we started doing quotes we didn’t actually notice a massive increase, and some people even got the same premiums,” she says.
However, since then, they have registered increases for women as a result of the directive.
Take the example of a 42-year old female smoker. She is likely to see the cost of the cheapest available life cover rise by more than €10 a month, or by about €144 a year. A 40-year-old male smoker, on the other hand, looking for cover of €165,000, can expect to see the cost of his premiums fall by about €4 a month, or about €50 a year.
Indeed, Irish Life has said that it expects a “small reduction” for single life male premiums and a “moderate increase” for single life female premiums.
The directive will also impact on other types of protection policies, such as critical illness and income protection. According to New Ireland, younger customers will see little change in specified illness policies, but there will be an increase in rates for older females and a “small reduction” in rates for older males.
With regards to income protection, the introduction of unisex rates means that men will actually see their rates increase, while women will benefit from a reduction.
Life assurance
The winners: Men
The losers: Women
Income protection:
The winners: Women
The losers: Men
Car insurance
When it comes to car insurance, the statistics are in favour of women and against young men, who are the most likely to cause accidents.
Now, however, the statistics have become irrelevant, as insurers must offer policies on a unisex basis. Good news then for young men, but not so good for females, who are facing increases in their premiums as insurers re-assess their books.
According to Chill Insurance, young men are likely to benefit the most, and could see a “dramatic decrease” in their premiums. For example, a 17-year-old male driver living in Dublin could see their premiums slashed by almost 60 per cent, from more than €4,000 a year to less than €2,000.
Conversely, young females will see a jump in their premiums, but it’s unlikely to be as high as the decrease young males are expected to get, while 35-year-old males are likely to see little or no change to their premium
The directive will also likely see an end of insurance products specifically targeted at women. According to Zurich, for example, its Ladystar policy is now available to both men and women, which means that a name change is likely on the way.
You can also expect insurers to come out with new promotions that have nothing to do with gender. AXA, for example, has just launched a 13 per cent offer for new customers.
And watch out for ways you might face unexpected increases. If, for example, a man puts a daughter on his policy as a named driver, he might see an increase in his premiums.
Similarly, a young man might see a significant reduction in his policy, but if he has his wife as a named driver on his policy, then the increase in her rate could diminish the benefit.
Winners: Young men
Losers: Women
Annuities
Up until last December, if you were a man looking for an annuity policy, you would typically have found that you were offered a better rate than your wife. This is because men have a shorter life expectancy than women, so the insurance company predicts that they will have to pay out the annuity over a shorter time-frame – hence the lower rates.
The difference was generally of the order of 5-8 per cent in favour of men, but with unisex annuity rates now in play, the new rates are likely to move closer to the formerly lower female rates. As a result, New Ireland, for example, is forecasting a “small increase” in pension income for women, and a similar reduction in income for men.
Of course annuity rates aren’t just guided by gender, and also depend on factors such as age, the guarantee period, whether or not it’s for a single life or a couple, and external factors such as bond yields. Remember also that the directive won’t impact on employer-related annuities.
The winners: Women
The losers: Men
What’s next?
Now that the gender directive is in the process of being bedded down, it’s likely that insurers will turn their attention once more to the draft anti-discrimination directive on age and disability. Under this directive, insurers would not be able to price differentiate based on a customer’s age and health.
Insurers have described the possible impact of such a directive as “devastating for the industry”, because without such information, it would be impossible to determine the riskiness of a customer. They have also argued that it would work against consumers because insurers would be precluded from offering certain types of products. But whether it is introduced or not, or in what form, remains to be seen.
Case studies: How the changes will affect you
Life cover for a couple
Customers: Male (38) and female (36), both non-smokers
Cover: €300,000 over 40 years, Dual Life Cover Level Term
Cost (pre-Directive): From €82.90 -€111.76
Cost (post-Directive): €84.12 - €95.86
Male-only mortgage protection
Customer: Male (40), smoker
Cover: €165,000 over 21 years
Cost: (pre-Directive): From €28.99-€34.72
Cost (post-Directive): €25.84- €30.54
Female-only mortgage protection
Customer: Female (42), smoker
Cover: €220,000 over 29 years
Cost (pre-Directive): From €43.45-€67.41
Cost (post-Directive): €55.43- €67.41
Source: lowcommission.ie
