1 March 2011

Unisex pricing for insurance

The European Court of Justice have today ruled that insurance premiums cannot be set based on gender.

This is an extremely significant decision (although not entirely unexpected). It's small comfort that its implementation has been delayed until December 2012 which at least gives the insurance industry some time to get things organised.

In practice it means that:
  • car insurance will be more expensive for women and cheaper for men
  • life insurance will be more expensive for women and cheaper for men
  • critical illness insurance will be more expensive for men and cheaper for women
But most significantly from my perspective...
  • Pension annuities will be more expensive for men, so pension income will be reduced (that's because men die younger so their annuity purchase didn't have to last so long, so they got more income for their money) - a figure of 8%-10% more expensive has been suggested which means that much drop in pension income. How an un-elected body is allowed to reduce the value of the majority of men's pensions at a stroke with no recourse is quite amazing! (final salary schemes are not affected)
Whether all of that is "sensible" is a difficult question. I suspect it was an unexpected side-effect of anti-discrimination legislation. Removing bias might be regarded as a good thing, but some of the current differences are more to do with biology than bias and it's madness to ignore that!

So whether anyone will be better off after the changes (other than those who like to blindly tick the anti-discrimination box regardless of the real impact) remains to be seen.

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