Britons face a major change in the retirement landscape as men being charged different insurance premiums to women is soon to end in the UK.
Currently men and women of the same age are often charged different premiums for the same level of insurance cover or offered different benefits for the same premium.
The reasons for this are related to the likelihood of a man and a woman making a claim being different and the fact that the average lifespan of men and women are expected to be different together with other physiological differences and risk factors.
From December 21, 2012, insurance providers will no longer be able to use gender to as the basis for differentiation of premiums and benefits.
Article 5(2) of the Gender Directive 2004 allowed EU members to opt-out of the requirement to not use gender as a risk factor where actuarial data supports its use.
The UK implemented this opt out in the Equality Act 2010 and companies rely upon this to differentiate premiums on the basis of gender.
However, in 2009, the Belgian consumer association “Test Achats” brought a case before the European Court of Justice (ECJ). On March 1 the ECJ ruled that the opt-out was invalid.
New insurance business must be issued with gender-neutral pricing where the customer forms a “new contract” on or after December 21.
New policies not completing in time before this date will result in re-quotes on a gender neutral basis.
This is going to have an impact on a variety of insurance products and will affect both sexes. According to Towers Watson, differences between male and female mortality rates are deep-seated.
A 65-year-old woman are currently expected to outlive a 65 year old man in 185 out of 193 World Health Organisation countries. In the UK, the gap is currently about two-and-a-half years.
Life and critical illness cover has traditionally been less expensive for women. However these prices are likely to increase. Up to now, men have paid less than women for income protection insurance.
Gender neutral pricing is likely to mean they will have to pay more for the cover.
Therefore, if you are contemplating setting up some life assurance or income protection, you may wish to do this sooner rather than later to make sure you are not caught out by the equalisation of premiums. Men have previously enjoyed higher annuity rates than women due to a decreased life expectancy.