The UK insurance industry uses many risk factors in order to work out the cost of insurance to the consumer.
Insurers collect claims and other statistics and use this information to ensure that customers who are more likely to claim, pay more for their insurance. For example, statistics indicate that women live longer than men and this means that life insurance is generally cheaper for women than it is for men. But because women live longer than men, they will get a lower annuity rate when they go to buy their pension as the insurer is statistically likely to have to pay out their pension for longer.
Such discrimination on the basis of gender will become illegal on the 21st December 2012, when the EU Gender Directive comes into force, and for the purpose of the cost of buying insurance and the nature of the product, women and men must be treated as equals and individuals.
For car insurance cover, women drivers are warned they could see dramatic rises in premiums ahead of the gender legislation coming into force in December. Underwriters know from their claims statistics that young men are more likely to have an accident than young women, so they are currently charged more to insure their cars.
The Gender Directive ruling is likely to force car insurance costs up for young women. Association of British Insurers (ABI) research predicts an average increase of almost 25% for women under 25, whilst young men could find their premiums dropping by around 10%. It could be worthwhile reviewing your car insurance early if it is due for renewal in the early part of 2013. Otherwise, shop around carefully at renewal time and make sure you get the cover you need, remembering that some policies may have lesser cover to make them more price competitive.
Women could also see life premiums rise by as much as 20 per cent, as insurers will no longer be able to take account of women’s greater average longevity, of around five years compared with men. This, though, could benefit women looking to convert a pension pot into an annuity. The Association of British Insurers (ABI) said women could expect to scoop an annuity 6 per cent higher, but men could see theirs fall by 8 per cent.
If you already have policies in place, now is a good time to review what you’ve got to make sure you have the right cover at the right price. A man who is retiring after 21st December 2012 could be hundreds or thousands of pounds worse off, as annuity costs for men, who statistically don’t live as long as women, are likely to increase.
Women on the other hand, who can expect to live four years longer than men, are likely to find themselves better off! However, it should be remembered that most annuities are currently bought by men, so women will be negatively impacted anyway if they rely on their husband’s pension for their retirement income.
As always, if you would like any financial planning assistance, please do not hesitate to call us.
