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The Female Price of Equality

The  2004 EU gender directive made it illegal for any insurer to use gender as one of the risk factors when determining insurance risk and premiums for insurance policies.

The European Court of Justice (ECJ) allowed insurance companies an opt-out if they could provide statistical and actuarial evidence to explain the reasons for differences in the premiums charged to males and females. An example of this could be young male drivers, who are more likely to have a claim on a policy.

Last year, the ECJ ruled that this opt-out will no longer be valid from 21st December 2012. From this date, males and females must be treated equally as insurers will no longer be able to discriminate on gender. In effect, this means that the premiums and the benefits of an insurance policy must be the same for both genders. While insurers may argue that this is unfair, based upon statistical evidence and past claims‘ history, it will become law.

The law will affect such insurance policies as; life cover, serious illness cover, income protection and car insurance.

It is clear that markets that were previously regarded as niche markets will have to adopt new marketing. The days of advertising to careful women drivers will be over.

The types of insurance that the EU gender directive will potentially impact upon include: life cover, serious/critical illness cover, income protection cover and car insurance.


Likely effect on various insurance policies

Income Protection

Potentially, the largest impact will be felt by income protection products. Currently the cost to females is up to 70% higher than the male equivalent. Going forward, females will obtain better premiums but it expected that male rates will increase dramatically.

Life Insurance

Currently females have premiums that are 20-30% lower than males. Females will see an increase, and males may experience a decrease.  The differences are most considerable for the under 45 age group.

Serious/Critical illness insurance

When the legislation change comes into effect it is likely that those with this type of cover will not experience much of a change. The differences depend on age and the term of cover. experience much of a change.

Time to act ?

On average, it is anticipated that overall there will be a 35-50% increase in premiums for females and a possible 0-10% decrease in premiums for males.

Insurance cases, under the current rules, must be finalised by 20th December 2012 in order to receive a gender specific rate.

This is the last chance for women, that have families or businesses to protect, to obtain preferential terms based on gender.

Isn’t it time to act before this impending legislation comes into force?

About the Author: Christopher Lean is a consultant at Square Mile Financial Services ( ) and an Associate of the Personal Finance Society (Chartered Insurance Institute). 

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