What is happening?
The European Court of Justice has ruled that from 21 December 2012, insurers can no longer consider a person's gender when calculating individual premiums and benefits.
Historically gender has been one of the factors used to assess risk in insurance with different risks linked to gender being taken into consideration to calculate premiums and benefits. This will now be changing and motor insurance, life, critical illness and income protection insurance, as well as retirement products, such as annuities and income drawdown, are set to be affected by the changes.
The European Court of Justice has ruled that insurers can no longer consider whether you are a man or a woman when calculating the price of insurance premiums and any benefits. Insurers must implement the changes by 21 December 2012.
Why is the change happening?
The change is happening because of a ruling by the European Court of Justice. UK insurers fought for nearly a decade to keep the right to offer customers premiums that reflect their risk as accurately as possible, by using gender, but have now lost this battle. Following the ruling Equity Red Star (ERS) has been focused on adjusting its products and working to make sure the change is as smooth as possible for customers. For Private Car ERS' new technically derived product has helped us to understand what premiums our customers should be paying for their 'risk' excluding gender as a factor.
How will insurance premiums be affected?
Gender is one of many factors that insurers have historically considered when calculating premiums. Now that insurers can no longer consider a customer's gender, it is expected that the cost of premiums for some products may be affected. For example, younger women, who tend to benefit from cheaper car insurance premiums than younger men, may now see their motor premiums rise. The real extent of the changes will be clearer across the general insurance market closer to and after 21 December 2012, and insurers are readjusting their products to offer customers premiums that are as fair and accurate as possible. As part of the implementation of our new technically derived product, ERS have already implemented gender neutrality for Private Car and other classes of business where gender has historically been used as a rating factor. The premiums of those products where gender has never been used as a rating factor (such as Commercial Vehicle) should not be affected.
Will my current policy be affected?
Only new insurance policies and renewals will be affected by the change. If you have an existing insurance policy, the change should not come into effect until it is renewed.
When will the changes happen?
By 21 December 2012, affected insurance policies will be priced without considering a customer's gender. Insurers will be adjusting their systems/products ahead of 21 December 2012 to make sure they are ready to offer gender-neutral pricing in time for the date. ERS has already completed its changes.
What do I need to do now?
If you have an existing insurance policy, it should not be affected until it is due for renewal. If you have a policy with ERS, then as of the 4 September 2012, whether you renew your current policy or choose to request a new quotation, the premium offered on both will be gender neutral as ERS has implemented a new gender neutral product from this date. The UK insurance market remains very competitive, despite the ECJ ruling.
What if I need to process a mid-term adjustment after the 21st December?
The ruling applies to 'new' contracts only (including renewals) and consistent with UK contract law a MTA processed after the 21 December 2012 of an ERS policy incepted prior to the 21 December 2012 will be classed as an amendment to an existing contract rather than a new contract. Therefore, should an adjustment be required, the premium will be calculated in such a way that only the factor amended will affect the premium until the contract is due to be renewed, at which time gender neutral rating will apply to the policy.
My Policy is due for renewal around the 21st December, will my premium be affected?
Yes, the gender ruling change affects both new insurance policies and renewals. If you have a policy with ERS we have implemented our gender neutral rating well in advance of the December date. Our new technically rated product is built to be as fair and accurately priced as possible.
Will the premium be different if I choose to accept the policy before or after the 21st December?
If the quotation is for an ERS policy and is obtained after the 4 September 2012 then there will be no difference in premium as ERS implemented a new gender neutral product from this date.
Will insurers be rating on things like occupation to counter the removal of gender specific rating? i.e; rating a hairdresser cheaper than a builder?
The ruling states that gender cannot be used as a factor for rating either directly or, indirectly. Occupation rating may differ between occupations however, a male hairdresser and a female hairdresser will be rated the same.
This document has been compiled using the Consumer Section of the Association of British Insurers website with amendments and additions ensuring relevance to Equity Red Star policies only.
