Countdown to unisex pricing

(Nov 2, 2011)

In just over one year's time, insurers throughout the European Union will be prohibited from using a person's gender to price insurance risks.  This court ruling applies to individual contracts, but not (apparently) to group arrangements.

For insurers it is time to review their pricing bases and systems in good time for December 2012.  Gender has been used as a risk factor in insurance for a very long time: the oldest copy of the Journal of the Institute of Actuaries on my bookshelf shows that actuaries were separately calculating mortality tables by gender at least as far back as 1871.  As a result, it is quite possible that pricing and quotation systems have some subtle oddities, and these will need to be identified…

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Tags: gender, annuities

Devil in the detail

(Mar 9, 2011)

Last week I wrote about the judgment by the European Court of Justice which bans the use of gender in insurance pricing after 2012.  An interesting aspect is the areas of insurance business which may not be affected.  For example, reinsurance transactions look likely to be out of scope, and some pension-scheme risk-transfer products look to be in a similar situation.  The original text of the 2004 Directive states:

"the use of sex as a factor in the calculation of premiums and benefits for the purposes of insurance and related financial services shall not result in differences in individuals' premiums and benefits."



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Tags: gender, annuities

Gender and annuity pricing in the EU

(Mar 2, 2011)

In a previous post we discussed the possibility of gender being banned throughout the EU as a rating factor for insurance pricing.  This has now come to pass - on 1st March 2011 the European Court of Justice ruled that gender may not be used in insurance pricing according to European law.  So what will happen now?

In the short term, annuity pricing itself will not change.  Insurers can continue to use gender in annuity pricing until 21st December 2012.  After that date, unisex insurance pricing will be in force.  This will lead to all sorts of unintended consequences.

Although pricing will not change in the short term, behaviours will change, possibly quite radically.  Men approaching retirement age with a personal…

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Tags: gender, annuities

Between a rock and a hard place

(Oct 5, 2010)

The Advocate General of the European Court has recently opined that " the use of actuarial factors based on sex is incompatible with the principle of equal treatment for men and women".  This is an interesting example of a collision between a fine ideal (equal treatment for men and women) and everyday insurance realities (young males crash a lot of cars and women tend to live longer than men).

However, the hopes of any consumers expecting cheaper insurance prices are likely to be dashed.  Restricting insurers' ability to price according to risk will impose costs, as outlined in a speech by Calum McCarthy the last time this subject was topical.  Like any other business, the insurance industry will pass…

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Tags: gender, Solvency II

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