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Gender Pricing for Life Insurance
Gender pricing is a hot topic in 2012. Below is an overview from Ageas Protect on what it means to you.
What is gender neutral pricing ?
The European Commission has introduced a Directive stating men and women must in future be treated equally when buying goods and services, and that requirement extends to the sale of insurance. Its decision means the insurance industry can no longer set base insurance prices at a more favorable rate for women than for men or vice versa. So new premium pricing is likely to be introduced from 21st December 2012 – the date when this ruling comes into force.
Calculating premiums is a two-stage process. The first is applying a base rate. Companies like Ageas Protect have, until now, used proxies like age, sex and smoking status to apply an appropriate base rate. The unisex rule means that insurers will no longer be allowed to distinguish between the sexes at this stage.
The second stage for calculating premiums are the ratings applied during underwriting, which are based on the individual applicant’s circumstances and medical history.
Underwriters will still be allowed to apply a larger rating to, for example, a woman with a family history of breast cancer than to a man with a family history of breast cancer.
This is because there are real physiological differences between men and women that affect how likely they are to develop certain diseases, like breast cancer, and these ratings are applied based on knowledge of the individual and the biology of disease.
The impact of this pricing shift is that for a woman taking out a critical illness policy on or after the 21st December, the base price could be 11-15% higher than it is now.
Men may also have to pay higher premiums on or after 21st December 2012 for new income protection cover. At the moment, women can pay 30-40% more than men for income protection so the potential premium increases for men could be significant.
We’re still crunching the numbers to accurately assess what this means for our premiums and there are still a lot of legal issues that the industry is waiting for the European Commission to clarify. But we’ll continue to use our existing underwriting philosophy and identify ways to improve our pipeline of business in the run-up to G-Day (as it's becoming known), and we’ll do everything we can to ensure the shift to gender neutral pricing is as smooth as possible for you and your clients.
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