Insurance and pension costs hit by ECJ gender ruling

21 November 2011

Insurers cannot charge different premiums to men and women because of their gender, the European Court of Justice (ECJ) ruled in March this year, and, as there is now just one year to go before implementation, we thought we would cover the main issues.

When?

The ruling will come into effect from 22nd December 2012. From then onwards, women and men must be charged the same rates. For example, despite lower claims, women will no longer be able to be charged lower car insurance premiums than men. And, men cannot get higher annuity incomes than women despite living shorter lives.

Although the change is not enforced until 22nd December 2012, we could see premiums alter in the interim, as providers prepare for the change over.

Representatives of the insurance industry have expressed disappointment at the change, for practical reasons and actuarial pricing logic, but, as the ruling has been made on an important point of principle, it is unlikely to be changed back any time soon. "Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination," the ECJ said.

The deadline of 21 December 2012 was set to allow national governments and the European insurance industry time to adjust.

What?

Prices will change for insurance contracts such as life cover and annuities. We cannot predict the exact changes to prices. The following provides a quick guide:

Potential premium changes

Men could see an 8% reduction in annuity rates, but women could see a 6% rise
The cost of life assurance could increase by 20% for women but fall by 10% for men

Source: Estimates from ABI commissioned research in Autumn 2010

The providers will be eager to assess each others tactics in the lead in to the change and immediately afterwards. There will undoubtedly be some volatility in insurance pricing until the underwriters feel settled.

Paul Doble
Director, Creative Benefits