When filling out an insurance form one of the first questions asked is usually whether you are male or female. It is one of the first factors that insurers take into account when estimating the price of most policies.
However of this Wednesday next year, it will be illegal for insurance companies to use gender as a factor when calculating the price of insurance. Without this tool, we can expect to see some changes to insurance prices. News Insurances had a look at the three areas which will see the biggest changes.
Life insurance
Because of the different life expectancies of men and women, gender is used as a factor when determining the price of life insurance. Women generally live longer than men and have lower mortality rates, so they pay an average £5 a month less than men. Come December 21 next year, men will be slightly better off and women slightly worse off when this price gap closes.
Annuity rates
Because men don’t live as long as women, their annuity pay out period is expected to be shorter. As a result of this, they are generally payed more annuity per year than women. Ultimately both sexes are expected to receive the same amount but men receive it in a shorter period of time.
With the changes, males will receive an average of 1% less annuity and female annuity payment will rise by an average of 5%. The treasury, in their response to the ruling, said, “although women will enjoy an up-front uplift in rates…in the medium term, the adverse selection impacts are likely to bring down annuity rates for both sexes”
Car Insurances
Car insurance is the big one, with prices for young people expected to change dramatically.
Young men are the highest risk category of drivers because statistically they have the most, and the most expensive, accidents. Currently they pay just over £5,000 per year in premium compared to just under £3,000 for young women. This price gap is justified by the price difference for claims which young men and women make. On average, a young male will make a claim of around £1,700 compared to the average claim of £800 made by women.
After the changes are implemented, young women will be paying around 24% more for their policies to make up for a drop of around 10% for men.
While these are the three main changes to policy pricing it is not an exhaustive list. Essentially any policy which involves people will be effected and we will have to wait until December next year to see exactly how.
