Not exactly an exciting start to an article with a title like that, I’m sure you’ll agree!
But this is about to be implemented by all insurance companies in December and will affect pretty much everyone with particular emphasis perhaps on females.
So what is it all about?
Well, back in 2007, the Gender Directive ruling allowed insurance companies to still discriminate between male and female rates as long as they could prove with statistics that there were good reasons for going so.
One of these could have been that, for example, amongst young drivers females have fewer accidents and therefore are rewarded with lower insurance premiums (the words ‘boy racer’ come to mind).
But the latest EU ruling has stated that this is no longer acceptable as it flies in the face of the spirit of the Gender Directive and that unisex rates must be brought in by 21st December 2012, as the Directive was clearly about eliminating different premiums for people of different sexes.
So that’s that then.
So how will this affect things for us all?
Let’s take a look at some of the most common issues:
In the past, a female taking out life cover had lower premiums as they were overall a better risk for the insurance company due to the fact that, on average, they live longer than males.
This will now be ending, with equal rates for both men and women.
The opposite has been the case for females on this form of insurance cover, with premiums normally costing them more and sometimes a lot more.
This is because the actuaries have decades of statistics showing that not only do females claim more, but they tend to also claim for longer.
Again, the new ruling will now mean that both male and female rates will be equal. Although many providers have not finalised rates or at least let them be known yet, LV have been quoted as saying that they expect female premiums to drop by 28% but mens to increase by a similar amount.
A point worth making on both the above issues is that insurance companies have had huge costs (millions) in changing their systems due to the Directive.
Therefore, in the opinion of one provider, although there will be some clear winners with the changes overall premiums will increase.
Critical Illness Cover
Perhaps reflecting these increased costs for insurance companies, LV have said that they expect rises in premiums for both sexes, and critical illness with life cover could rise by 6% for men and 16% for women.
An annuity is what you purchase when you convert the amount of pension fund (usually in a private pension / Self Invested Personal Pension) you have accrued.
Annuites provide a level of income and can include various features, such as spouse benefit and inflation protection. Currently, the rates are different between the sexes.
Since females (on average) outlive males, they are only able to secure a lower annuity rate, meaning they get less annual pension for the same pot.
This will now change with the new unisex rates.
Prudential has stated that a male with a £50,000 pension pot, retiring at age 65 taking a level pension, will receive £2,506 a year now.
However, this will reduce to £2,467 under the new rules. A female in the same position will see her income increase from £2,277 to £2,467 – a gain of 8.3%.
The biggest gainers will be young men, and the biggest losers young women, although it is not totally clear yet how exactly this will feed through into premium rates.
For drivers above age 30 it should make little difference.
Women are set to be clear winners with the amount they get for their pension pot and with new applications for income protection.
However, it looks like they will be losers on life and car insurance.
If you are due to renew your car insurance (or your children are!) and are female, it is worth looking at urgently. Also, can you renew early?
On annuity rates, although the rates for males are not expected to drop too much, if you are due to take your pension this way it could be a good idea to move quickly.
Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson Ltd and helps Doctors & Dentists plan to achieve their ideal retirement. Just visit the specialist website for dentists’ and medics’ financial planning to request your free retirement planning guide. Rutherford Wilkinson is authorised and regulated by the FSA.