The chairman of the Financial Services Authority, Callum McCarthy, has condemned European proposals to eliminate gender discrimination in the insurance market, warning that the move could cost the industry more than £1bn.
In a speech to the Global Financial Leadership Forum yesterday, Mr McCarthy also claimed that if the proposals were successfully implemented, insurance premiums for both men and women would soar.
Currently, British life insurers charge significantly higher premiums for male life insurance due to their shorter life expectancies, while women receive worse annuity rates than men because of their longer average lifespan. Similarly, women pay lower motor insurance premiums because statistically they are less accident-prone.
Under the EU proposals, however, such discrimination would be banned, forcing women to pay much higher life and motor insurance premiums, and reducing the amount that men receive from their annuity in retirement.
Figures from the FSA estimate that women's life insurance premiums could rise by up to 16 per cent, while men's retirement income would fall by up to 8 per cent.
Mr McCarthy said: "All these changes will be driven not by the correction of any error in the present actuarial assessment of risk, but by the opposite - by a deliberate design for a good social objective to override realities of life expectancy or of actual behaviour. It is not surprising that the results of such a policy would have such arbitrary consequences for men and women - sometimes favouring men, sometimes women, but in no case corresponding to the underlying reality."
Mary Francis, the director general of the Association of British Insurers, who has been critical of the proposals since they first emerged last year, welcomed Mr McCarthy's speech.
Ms Francis said: "The FSA's intervention into this debate is highly significant. The regulator is joining a growing consensus in the industry and outside which can see that these proposals would hurt many millions of customers."
But Stuart Bayliss, the managing director of Annuity Direct, an annuity specialist, said that while the proposals were unhelpful, they would not prove to be as significant as the FSA had warned. He said: "In terms of pensions, the gap is getting smaller, so at some point, which won't be very far away, the difference will soon be insignificant. But this is a political decision."Reuse content