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Insurance Q&A: what you need to know about the Gender Directive
From tomorrow it will be illegal for insurers to charge men and women different rates for their car and life insurance. We explain what's going on.
by Michelle McGagh on Dec 20, 2012 at 09:00
Over the years we've become used to the way gender affects the price of insurance. From tomorrow, however, the rules change and so will the cost of protecting your family and insuring your car.
From Friday, 21 December, UK insurers will have to abide by the European Union’s Gender Directive that will change the way they price their policies.
What is the Gender Directive?
The Gender Directive is a new set of rules from Europe that dictate insurers can no longer use gender as a criteria for determining the price of certain financial policies.
The ruling follows a European Court of Justice judgement in March 2011 which ruled that the use of gender as a ‘risk factor’ by insurers should not result in individual differences in premiums or benefits.
In layman’s terms, this means that insurers cannot offer better or worse rates to someone based on whether they are female or male.
How does it affect me?
If you’re either a man or a woman who buys car insurance, life insurance, private medical insurance, or income protection insurance then you will feel the impact, as will people coming up to retirement who plan to buy an annuity.
The changes will bring pricing in line for men and women buying these policies, but instead of making prices for insurance and annuities cheaper for one gender, prices are likely to increase across all products.
What about my pension?
If you plan to turn your pension savings into an income by buying an annuity – essentially an insurance policy against living too long – then you are likely to see prices increase.
Until now a man retiring would receive a larger income from his pension than a woman who has saved the same amount. There is a simple reason for this: statistically women live longer than men so the income will be paid out over more years.
Figures from the Office of National Statistics show a man aged 65 today will live to 83 on average and a 65-year-old woman to 85.
But before any retiring women start rubbing their hands together at the prospect of loads more pension income, the Gender Directive isn’t unlikely to actually put much more money in their pockets. It is expected that more insurers will reduce male annuity rates to bring them in line with female rates.
According to online broker Hargreaves Lansdown there has already been some changes to annuity rates over the past few weeks in anticipation of the new rule.
More about this:
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- 'Free-falling' annuities set to dive again after gender ruling
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