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A seismic week for the insurance industry

Equality Act 2010

The first week in March was one that will be remembered by the insurance world for a long time:


  • Insurers will be banned from offering differing prices or cover to men and women from December 2012 - across the EU

  • The ban on pricing and benefit differentiation could be extended to age, disability and health

  • There will be new laws on age discrimination in 2012.

  • The cross-border EU healthcare directive has passed-this will affect private health insurers

  • The Treasury has said that the FCA will not now be involved in consumer education/ advice/financial inclusion –that is now down to insurers


If you watched television and read the papers, you may have seen or read some of the worst garbage on insurance for years - some from uninformed media but a lot from insurance people - often before they had actually read the full details anywhere.


Comments include; this is communism, more people will die on the roads, we should ignore the law, and David Cameron must ride to the rescue.


Insurance products are often made available at different prices to men and women because of allegedly different risks. Women are typically charged more for life insurance because they tend to live longer. Wild figures have been quoted on how much more and how much less men will pay on life insurance.


But life premiums have been falling for years in a very competitive market. Insurers have found it tough to sell long-term income protection and critical illness, so again prices have fallen. Few private medical insurers price on gender, while most health cash, dental and other health insurances do not use gender as a rating factor.


A 30-year-old model of how to price life and health insurances was already looking shaky with changes in retirement ages and life length. Obesity is the biggest health risk in the UK –but insurers charge a grossly obese person the same as a thin fit one; few take any notice of lifestyle or fitness; many insurances even ignore postcodes, which can hugely effect life expectancy and health. And, insurers have known about the problem since 1994.


Another problem insurers have battled against for years is age discrimination. After a set age, many insurers will not accept new business or will offer restricted terms and cancel cover at 70. Many still think old age begins at 60 or 65 –don’t they know that more people will have to work till 70 and live till over 80?


The Equality Act 2010 seeks to end age discrimination in services, and if a provider is unable to provide assistance to a person because of their age, it will be obliged to refer that person to a provider who can meet their needs or a dedicated signposting service. Insurers will still be allowed to use age when assessing risk and deciding prices. Age limits will still be permitted. However, any use of age in this manner must be based on information from a source on which it is reasonable to rely.


The new law is still in draft stage and this is where battle lines are being drawn, Insurers want to be able to use general information and assumptions as evidence, but consumer groups want insurers only to be able to use claims statistics from their own records. Due to competition laws, insurers cannot freely exchange detailed claims information and as many insurers in the past have refused to insure older people, may not have detailed stats. Insurers want to be able to say, “we have the stats that back us up" and not have to produce them. Consumer groups respond, "Allowing insurers to ask us to trust them without having to produce the figures that can be independently analyzed, is like putting a fox in charge of the chicken house."


The EU cross–border health care directive that will make it easier for people to go overseas for treatment from 2013, is aimed at state insurers like the NHS – and all private health insurers too.


The new Financial Conduct Authority (FCA) that partly replaces the FSA will not have to educate you about insurance, nor ensure insurance is available to you. FCA and PRA report to the Treasury. FOS will be overseen by FCA. FSCS will be jointly overseen by both PRA and FCA. CFEB and MAS will remain too. And above this lot are the new EU regulatory bodies ESRB, EBA, EIOPA and ESMA. This is the simplified regulatory system! At this point most insurers have given up and gone to the pub.


And they said insurance was boring!

Health insurance hot topic: April 2011