Julian Knight: There will be losers, but we have to iron out sex inequalities
Sunday 06 March 2011
So after seven years of dire warnings from the insurance industry it's finally happened; gender pricing has been banned. Among all the wailing and gnashing of teeth that followed a few things have be said.
Firstly, the media coverage highlights – if we need it highlighting – how little regard Britons seem to have for pension saving. The effects in the field of annuities are far more damaging than a couple of hundred quid a year on the odd motor insurance policy.
Men face the prospect of seeing their incomes fall by anything up to 10 per cent a year, over, say, 20 years of retirement that could add up to tens of thousands, if not more. Yet all the major news outlets focused on car insurance. They figure we care about the here and now rather than the future. And you know in most instances they're right. Martin Lewis's Moneysavingexpert site ran a poll last week asking readers if they would prefer £500 today or £1,000 in two year's time – nearly half would rather have the cash now.
Banning gender pricing will have an immediate impact on premiums but over time I'm more optimistic. It's as much in the interest of insurers as it is of consumers to correctly assess risk. So now they can't take whether you have XX or XY chromosomes into account, they will have to decide on new ways of assessing risk.
Occupation will become increasingly important – and this is an effective way of assessing all sorts of risk – we're used to it in motor cover but your job can have a major impact on how long you live. For instance, those engaged in work involving manual labour die several years sooner on average than professionals, while research shows nightshift workers die younger than those with normal working patterns.
We may also see the creep of genetic insurance assessment – if for example your mum and dad died in their fifties the chances of you following suit are above average.
Returning to cars, the technology is there for pay-as-you-go insurance where premiums will be assessed according to when and where you drive rather than blanket cover. This could be a good thing for cutting down unnecessary car journeys. If you think the short hop to the shops to get a paper will boost your car premiums you may decide to walk instead.
In short, in what is a highly competitive market, insurers are going to have to get creative about how they assess risk and get this across to the public. Insurance is going to have to be far more personal. And the challenge to insurers' will get even more difficult if, a few years down the line, the EU decides that age can't be used as a risk factor either. The words interesting and insurance have probably never appeared in print before but for the next few years they could belong together.
Labour's gender bias
On the subject of gender, Labour is getting exercised about a group of 33,000 women born after April 1954 who are going to have to wait to age 66 for the state pension. It seems unfair because according to Rachel Reeves, the shadow Pensions minister, women born a year earlier will be able to take a state pension a month shy of their 63rd birthday. This group is undoubtedly unlucky but nowhere near as unlucky as generations of men, who have had to wait longer for their pensions and have had the misfortune to die on average four years earlier.
Under the current system, women receive a state pension for nine years longer than men on average. What's more, this gradual increase in women's pension age is hardly new; we've known it was going to happen for over a decade. The new Government has just tacked on another year – Labour would have had to do the same – as part of its pensions review.
State pension ages have to rise if we are to be able to afford to pay them in future. Not forgetting that the Pensions minister, Steve Webb, is committed to the idea of an enhanced citizen's pension for all – rolling away Gordon Brown's cumbersome pension credit system, which rewarded people for putting nothing away while penalising those who had small savings. What's more, the gradual equalisation of pension ages is only right and proper and Labour's outcry has to be taken in the round.
For a couple of years, there was neither sight nor sound of consumer groups taking a "super complaint" to the Office of Fair Trading, and now, within a month, we have two. First Which? has asked the OFT to investigate rip-off credit- and debit-card booking fees, and not before time. Now, we have Citizens Advice venting against the debt-management and credit-repair industry over cold calling and excessive and, sometimes unauthorised, fee taking. This of course is nothing new.
I've regularly written about the consumer abuses of this industry and been on the end of abusive emails as a result. But it's good to see the CAB renewing the pressure on the OFT, which acted recently to close dozens of debt management firms which were acting to the detriment of consumers. It will be a happy day indeed when these industries get closed down for good.
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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