Why men will still lose out!
As I have mentioned in several blogs this year, women are about to see a hike in life insurance costs due to a European gender pricing ruling, but any benefit men will see will be wiped out by little-known UK government changes.
Typically women pay less for protection such as life insurance because they live longer and are less likely to die within the term of the policy, and conversely men pay more.
However, from 21st December women will no longer receive preferential insurance prices because a ruling from the European Courts stated that gender cannot be used to price insurance policies and ‘gender neutral’ pricing must be introduced.
Bad news for women
Unfortunately for women this will see the cost of life insurance increase by around 15% across the market, said Tom Allen, head of protection pricing at Aviva. ‘Women’s protection policies are due to go up by about 15%, which is the figure being talked about at the moment,’ said Allen.
However, he added that any benefit to the cost of life insurance men were hoping to see as a result of gender neutral pricing is also going to be wiped out by another change – this time implemented by the UK government.
Bad news for men
In updating the rules that govern life insurers the government has stopped insurers offsetting the cost of writing a policy against the profits of the business. This will lead to an increased cost in writing the policies for the insurer which will then be passed on to the consumer, male or female, wiping out any reduction in male life insurance costs and increasing the costs of female life insurance further.
‘We have lost the tax relief on the expense of writing the business and we expect that across the market, it will bring a step change in the way policies are priced. It is expected to increase prices around 10% across the board, but we think that it on the low side,’ said Allen. ‘For males that would wipe out the decrease they would have got in the move to gender neutral pricing.’
The combination of gender neutral pricing and a change in the taxation rules effectively means nobody of either sex wins out. Both men and women will see their life insurance policies increase.
If you are considering increasing your levels of life cover we would recommend that you act immediately, otherwise you may be paying a lot more for your premiums than you need to. As long as your plan goes on risk before the 21st December, you will be protected from any increase in premiums due to these changes.