Friday, September 14 10:38:53
The new EU Directive that will outlaw insurers charging different rates to cover women and men poses big problems for the industry than could be overcome by a "Pink and Blue" approach, according to one brokers group.
According to an EU directive which is expected to come into force in Ireland just before Christmas, "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".
In other words, premiums and benefits should not be different between two individuals for the same insurance policy, solely because one of the individuals is male and the other is female. Historically however this had been one of the key bases of pricing Life assurance cover.
According to broker organisation, the Trusted Advisor Group, to overcome the challenges this new directive presents, Insurers in Ireland are considering using the opportunity to offer more targeted products to the public - the so called pink and blue market segmentation approach.
"The exact implications and practicalities of the gender directive remain to be seen as does the impending reaction of insurance providers. But there is no doubt that the cost for Life and Serious Illness cover for women on individual policies will go up as insurers set one generic price for both genders. Potentially, women's premiums could rise by 20pc and men's could reduce by about 10pc. Joint and Dual policies should stay more or less the same as the rate changes should balance out between the assumed two genders. Joint life policies involving two males will fare particularly well. Correspondingly, two women on the one policy will suffer the most under the new gender neutral pricing," according to Paul Sutton, CEO of the Trusted Advisor Group (TAG).
While many consumers, particularly women, will see this as an unfair repercussion of EU legislation the Trusted Advisor Group believes that insurers, where possible, will endeavour to make the transition as painless as possible. The financial experts say that the Specified Serious Illness market has seen tentative signs of this already with the potential of new tailored new products.
"It would be difficult to introduce specialist targeted policies for Life cover which generally covers every eventuality that could result in death, but Serious illness policies cover a long list of specified illnesses, so there is some scope to vary these offerings for different applicants. While people are equally exposed to many illnesses, there are specific ones that each particular gender is more prone to. Men are naturally more worried about prostate and testicular cancer while women are more concerned about breast and ovarian cancer, so the concept of specialist tailored policies is likely to appeal. Within the sector, these concepts have been nicknamed "pink and blue policies". Needless to say as a result of the EU gender directive should this policy design become a market norm then each type will have to be made available to both sexes," said Mr Sutton.
The Trusted Advisor Group say that they foresee the cost of cancer cover will increase for males but drop for females. While Income protection will also drop for females but increase for males.