The European Court of Justice has ruled that insurers are no longer allowed to use gender as a basis for calculating premiums.
Matt Morris of LifeSearch believes this is a huge mistake, "This is a horrible mistake by the European court. It is essential for insurers to use gender to calculate risk based on solid actuarial evidence and statistics. It is price differentiation, not discrimination, as it is not a decision that comes down to the whim of an individual. The consumer will now suffer. Prices will go up across the board as insurance companies try to build in the new risk. Women currently pay more than men for life insurance, whereas men pay less for income protection. It is very unlikely premiums will meet in the middle because there will be huge costs to the industry of repricing and updating their systems so everyone will end up paying the higher rate. Everyone loses.”
Much industry reaction was to the headlines, before reading the actual court judgement, and based on very rough industry estimates of the price effect based on gut reaction rather than any solid statistics. Dave Grimshaw of Barnett Waddingham brings us back to earth with, “For some life insurance products, the impact may not be that great. A 30-year old male non-smoker might currently pay around £8 per month for £150,000 of term-life cover for 25 years, whereas a female non-smoker might pay between £6 and £7 per month. A gender-neutral premium of £7 to £7.50 per month is unlikely to have huge financial significance for most people so there should be little risk that the proportion of the UK public that does not purchase valuable protection for their families increases materially.”