Check your plans before the gender gap closes
Both sexes will see changes in product costs once EU rules come into force
Sunday 09 September 2012
There are many reasons it's great to be female. Though advantageous rates on financial services may not immediately spring to mind, women have benefited from a range of deals as we live quite a lot longer, on average, than men.
It hasn't all been rosy, with things such as annuity rates lower for women, but with new rules being handed down from Brussels, that's all about to change. Both sexes now have just a few months to make the most of the status quo on a host of products before the chance is lost.
The EU gender directive comes into force on 21 December 2012 and from then on it will be illegal for an insurer to use gender as one of the risk factors when determining an insurance premium.
At the moment, women generally pay less for car insurance as statistically they are less likely to have an accident than men. They also pay less than men for life insurance. Men, on the other hand, receive a bigger annuity as they have a shorter life expectancy.
The directive outlaws such discriminating between the sexes. However, it's unlikely that gender-neutral rates will simply settle in the middle for any type of insurance, and are likely to lean towards the "more expensive" sex.
Insurers say this is due to other influencing risk factors, but a cynic might say they are simply cashing in on the new rules.
When you retire you can use your pension savings to purchase an income for life, known as an annuity.
The amount of annual income that you can purchase will vary depending on the value of your pension fund, prevailing market conditions, your age, state of health, and, currently, your gender. With all other factors being equal, men who purchased an annuity from NFU Mutual in July 2012, secured on average 6 per cent more annual income than women.
Roger Ramsden, the chief executive of Saga Services, says: "It is generally believed that the new unisex rates will end up sitting somewhere between the current male and female rates; so in theory male rates may reduce, and female rates may rise as a result."
This means that men retiring soon should act sooner rather than later when it comes to buying an annuity.
"Because of this directive and other pressures on annuity rates, if you are a man who is planning on buying an annuity within the next few months, you'd be crazy to delay until after 21 December," says Tom McPhail, head of pensions research at Hargreaves Lansdown."For women the impact is harder to assess. There may in fact be no compensating uplift in rates, though they may rebound in time once insurers have found a new equilibrium."
Statistically women live longer than men, so life insurance is generally cheaper for women. Research from comparison site Money Minder shows some insurers are charging men up to 35 per cent more than women for equivalent life insurance.
But this will change in December – or earlier as some insurers won't necessarily wait until then to introduce gender neutral pricing.
Insurers are more likely to increase premiums for women than significantly decrease those for men. If women were to find their premiums raised to the same levels currently offered to males, the increased cost of their insurance over the term of the policy could run into several thousand pounds. For that reason, women thinking about buying life insurance should do it now.
"Of all the projections I've seen, I haven't once seen a scenario where prices for women will do anything other than rise," says Matt Morris, a senior policy adviser at broker Lifesearch. "Also, now is the time to review existing policies too. It will probably be a long time before prices will be this low for women again."
Other protection products
Currently premiums for other protection products such as critical illness cover and income protection are also influenced by gender. Women currently pay more than men for income protection but less for critical illness.
Insurer LV= says women currently pay 65 per cent more than men for income protection. After December it estimates they will see their cost of premiums fall by approximately 28 per cent while men will see a rise of 20 per cent.
Meanwhile the cost of critical illness cover will soon be affected by other new rules in early 2013, as well as the EU gender directive.
Known as the income minus expenses rule (or I minus E), life companies will no longer be able to offset costs of selling life assurance/critical illness cover against investment income. In short, this means the cost of policies for both sexes will rise. "In relation to critical illness cover, men generally pay 10 per cent more than females. However in some cases women do pay more than men," says Colin Payne of mortgage broker Chapelgate Associates. "Premiums for males are expected to increase by up to 6 per cent and females by up to 16 per cent."
Statistically women are safer drivers than men with the cost differences most exaggerated for young drivers; men aged between 17 and 20 currently pay almost double the premium of women the same age.
But young female drivers could be particularly affected by the changes after 21 December. Association of British Insurers (ABI) research predicts an average increase of almost 25 per cent for women under 25, while young men could find their premiums dropping by around 10 per cent.
"Insurers will argue that, statistically, young men cost more to insure as they make more expensive claims than women, and that this is reflected in the premiums that they are quoted," says Scott Kelly, the head of motor at Gocompare.com. "Insurers are unlikely to absorb the risk of insuring young male drivers by lowering their premiums to fall in line with women's, it's more likely that women will end up paying more."
Statistics from both GoCompare and Moneysupermarket.com suggest that insurers have not yet altered their pricing for gender which means, for now, women can still benefit from cheaper car insurance premiums.
"If anything, premiums for women seem to be particularly competitive at the moment and it may be the case that insurers are looking to buy up female business in order to price them accordingly when they come to renew after the directive deadline has passed," says Peter Harrison of MoneySupermarket.
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
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