Phil Brown, Zurich UK Life considers the issues of Gender & Protection
One of the biggest issues to be addressed in 2012, in a year when many other changes are likely to be afoot, is how the EU Gender Directive will impact on protection. From December 21 2012, the use of risk factors based on gender in connection with insurance premiums and benefits will officially become incompatible with the principle of equal treatment for men and women under European law. The rule of unisex premiums and benefits will apply.
So, what does all this mean for our industry and, specifically, for protection?
On 22 December the European Commission published its guidelines on the application of Directive 2004/113/EC to insurance in light of the Test Achats judgement earlier this year.
It is pleasing that the guidelines seem to reflect the industry’s view on the main implications of the ECJ ruling. Contracts concluded before 21 December 2007 and/or expiring before 21 December 2012 should be unaffected. However, certainty is still needed on contracts concluded after 21 December 2007 that continue after 21 December 2012 and contain mechanisms for review, renewal, or other adjustment.
Whilst the EC guidelines are now final, HM Treasury is currently consultingon the national implementation of the judgement. The consultation closes on 1 March 2012 and seeks views on the Government’s legal interpretation of the judgment and the accompanying draft regulations that amend the Equality Act. It also seeks comments on the Government’s impact assessment and requests additional data that would contribute to a better understanding of the impact on consumers and insurers. Finally, it asks for views on some of the key issues arising from the judgment, such as the scope of indirect discrimination.
The area that is currently getting a good deal of attention, not surprisingly, is what the impact might be on premium rates. Whilst it is hard to look at gender impacts on premium rates in isolation, given the future removal of protection business from the income minus expenses life tax system, many industry commentators are already predicting that gender may cause some reasonable reductions in male rates, whilst female rates would need to increase. With the tax regime changes (that will affect different companies to varying extents) overlaid on top of the gender impact we may see male rates reduce or remain broadly neutral, although female rates could increase quite significantly.
Underwriting has also been a focus for protection providers and the EC guidelines provide some good news in this respect confirming that the industry should be largely OK in maintaining existing underwriting practices. This is a very positive outcome and is a result of industry lobbying.
Whilst we can debate whether the gender directive changes help the existing protection gap or hinders it, advisers may see this as a good time to reinforce the importance of protection cover to their potential clients.
Phil Brown, Head of Protection and Underwriting, Zurich UK Life
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