Last updated: March 1, 2011 5:31 pm

Gender ruling: How it affects you

Insurers can currently take gender into account as a risk factor to calculate not only insurance premiums, but also the annuity income they will offer to their pension savers.

However, from December 21, 2012 insurers will no longer be able to charge different premiums for men and women. We set out the winners and losers from the new ruling.

MOTOR INSURANCE

The biggest losers will be female drivers under the age of 25, who will almost certainly see their premiums rise by between 25 and 50 per cent. Currently young women are offered better rates as they are safer drivers than young men.

Based on the current average premiums, a 17- to 22-year-old female motorist could pay about £400 more at renewal after December next year, while a young male driver could pay £270 less, according to the AA, the motor breakdown service.

“Young women have, until now, paid car insurance premiums that are typically up to 50 per cent cheaper than men. In the short term, they will see their premiums rise significantly while those for young men are likely to fall a little,” said the AA motor insurance group.

PENSIONS

Men approaching retirement are likely to see a sizeable drop in their pension income, while women could be better off. With shorter average life expectancy than women, men are currently offered more generous annuity income.

But they will lose this advantage when insurers are forced to use unisex rates.

Research conducted for the Association of British Insurers in 2010 suggested that men approaching retirement could see an 8 per cent fall in annuity rates while female pension income could rise by 6 per cent.

Based on current rates, a 5 per cent fall in male rates would mean £331 a year less for a 65-year-old with a £100,000 pension pot or £6,620 over 20 years according to Just Retirement, a pension provider.

A woman on the same basis would see her income rise nearly £313 a year or £6,230 over 20 years.

However, some believe the impact will not be as dramatic. “Unisex rates are already currently used for Protected Rights annuities – annuities bought with contracted-out pension pots – and using these figures as a comparison it seems that male rates will reduce by about 2.5 per cent and female rates will increase by 2.5 per cent,” said Billy Burrows of Better Retirement, a pensions adviser.

LIFE COVER AND INCOME PROTECTION

Women currently pay less for life cover as they live longer. But their rates have been forecast to rise by up to 20 per cent while men could see their rates fall by 10 per cent. But these rises for women could be offset by cheaper income protection, where females currently pay more than men.

Some friendly societies already charge unisex rates on income protection policies so are not affected by the ruling.

PRIVATE MEDICAL INSURANCE

The vast majority of private medical insurers do not offer different premiums for men and women. For those that do, the difference in premiums is not significant, the Association of Medical Insurance Intermediaries said. However, some policies will have been priced on gender and policyholders should prepare for increases at renewal.

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