EU Gender Directive – important update

The Court of Justice of the European Union decided today that insurance companies are no longer allowed to use gender as a factor for assessing risk. This change is effective as of 21st December 2012.

This is a curious move, I’m not really sure how it has come about – whether men have complained or women, or whether an ‘equality’ group has brought the action. I could look it up, but whatever the answer, it will annoy an equal amount me so I won’t.

Anyway – here’s the idea.

We know for a fact that a newborn baby boy has a life expectancy of 77.7 years.

And we know for a fact that a newborn baby girl has a life expectancy of 81.9 years.

So it follows that if a man takes out some life insurance, he should pay a little bit more, because he is more likely to die. Or, putting it the other way, a woman should pay a little bit less.

Well, that little bit of statistical reasoning is no longer allowed, or won’t be from Christmas.

And that’s the thing. Insurance companies don’t give a stuff about whether men or women live longer, are healthier during that time or whatever. All they care about are the statistics. If keeping a pet dog was shown to increase life expectancy, that question would be on the forms and dog keepers would get cheaper life insurance.

Anyway, from December, women will pay more for their life insurance, to match what men pay. “What?” I hear you cry, “Why can’t men’s rates come down?” – well, the market is hyper competitive, premiums are already as cheap as they can get. It would be nice to think that some kind of inbetweeny unisex rate will evolve and I’m sure competition will make that happen.

Who else does it affect?

Well, motorists…especially customers of Sheila’s Wheels – women will have to pay mens rates…oops, I mean the new unisex rates.  This should get some headlines even if the rest of it doesn’t.

People who want Health Insurance – men suffer fewer illnesses than women, so men currently get cheaper income protection, cheaper critical illness insurance and cheaper private medical insurance. I’ve blogged before on Critical illness claims – Beast cancer is a huge factor in pricing. Women will benefit slightly in these types of insurance categories be getting slightly cheaper rates.

People retiring – currently if you are 65 and a man, you buy a pension that is priced on the basis that it’ll probably only pay out for 12.7 years, if you are a woman, it is priced on the basis that it’ll pay out for 16 years. So, annuity rates for women will improve and for men they’ll get worse. Couple have a problem though – for most couples the man is the main pension provider and will often buy a joint pension that carries on paying out to his wife after his death. Well, that means the wife’s part of the pension will be priced on the lower mans rates – not so good.

My top tips.

If you’re a man – get your critical illness insurance/income protection/health insurance sorted now, on guaranteed rates.

If you’re a woman – get your life insurance sorted out now, on guaranteed rates.

If you are retiring, take independent financial advice to consider your options, your 65th birthday is not D day and there are many options that may suit you, not just one.