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Gender Neutral Pricing – What Does It Mean?

Gender Neutral Pricing – What Does It Mean?

Come the end of 2012 things are set to change in the world of insurance. This change is substantial and it does affect you. It’s probably the most significant change in the insurance industry since its inception back in the 14th century. Us ordinary folk who have car insurance, life insurance, income protection and some day even an annuity when we retire are all set to be affected by the 2004 EU Gender Directive. In March of this year the insurance industry lost its ability to op-out of this Directive and as a member of the EU the UK is now obliged to fall into line. So what does this mean for me you ask?

The UK insurance market has long been regarded as a market that is fairly efficient at pricing risk. Unlike the banking sector there no obvious blips on the historical timeline to suggest the industry has got its maths wrong in the past. The industry is the custodian to a vast amount of data which reveals some interesting facts: Men get ill less than woman – so currently income protection insurance and health insurance is cheaper for men and they are offered a higher income on their annuities. Women live longer than men so currently life insurance is cheaper for them than men. Women are less inclined to be involved in car accidents than men – and so enjoy cheaper car insurance. It’s a concept we all identify with and it’s nice to know we’re paying for the risk of ‘our’ risk pool and not others. That’s going to change.

Come the end of 2012 the UK insurer will not be able to consider gender as a criteria when pricing the risk of the insured event. In order to cope with this degree of sea change the industry is likely to approach this new pricing world with caution. Current estimates suggest the industry will shore up around £1bn in capital to provide protection against the uncertainties of this new market reality. This ‘capital cost’ will find it’s way to our insurance premiums and when this comes after a year that saw inflation at 5% and sharp rises in car and household insurance premiums.

So my suggestion is to nip this thing in the bud. The new pricing should start to filter through toward the end of 2012. I would suggest this makes it a good time to sit down with your adviser and review your insurance requirements before the new pricing hits. You should view 2012 as the insurance industries ‘stock clearance sale’ so be sure not to miss the chance to update and review while stocks last.

For any questions on your financial planning please contact the author Mike Abbott at

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