What is the European Union (EU) Gender Directive?
From 6 April 2008, the Sex Discrimination (Amendment of Legislation) Regulations came in to force. This legislation is an amendment to the Sex Discrimination Act 1975 in the UK, and aims to ensure equal treatment between men and women in the access and supply of goods and services.
The revised legislation specifies circumstances that allow insurance companies to continue to charge different premiums, or offer different benefits, to men and women. This can only take place where it can be demonstrated (using relevant and accurate published statistical data) that men and women pose different risks, and are therefore expected to have different claims experience.
What published data are Friends Provident using to justify gender differentials? Friends Provident contributes data to the Continuous Mortality Investigation (CMI) and have opted to use published CMI data to justify charging different premiums, or offering different benefits, for men and women. What is the Continuous Mortality Investigation (CMI)? The CMI carries out research into mortality and morbidity experience on behalf of the UK Actuarial Profession. These investigations cover all the main types of life assurance, annuitant, pensioner, critical illness and income protection insurance contracts offered by the market. Life insurance companies covering a large proportion of the market supply the base data. Where can I access the published data Friends Provident use? As stated above Friends Provident use published CMI data, which varies by product, with separate tables for the following: • Life assurance and annuities • Critical Illness insurance • Income Protection insurance These tables can be accessed at http://www.actuaries.org.uk/knowledge/cmi/gender/
Will Friends Provident’s pricing fully reflect the CMI data? It is not possible to draw conclusions about an individual’s premium or annuity rates from the information in these tables for a number of reasons: The data in these tables is an industry average and may not reflect our own experience, which we are allowed to reflect in our pricing. Friends Provident, like all insurance companies, take account of factors other than age and gender when calculating premiums. For example, these may include expenses, lapses and investment returns. Premiums will depend on differentials by age throughout the term of the policy, not just the age at the start. Friends Provident will also take account of specific features relevant to the policies we offer, such as guarantee periods, deferred periods, escalation and different critical illnesses covered. Indeed the Treasury’s guidance states: “This data must demonstrate the case for differing treatment based on gender, but it is highly unlikely to present a direct correlation with the premiums charged or the benefits obtained in individual cases.” How does gender affect Friends Provident’s pricing for different products? Life Assurance For life assurance contracts a payment is made on death. The impact of mortality on life assurance is that, the longer an individual is expected to live, the lower the life insurance premium for a given level of cover. The CMI data shows that, across all ages, male mortality rates are higher than female rates. This means that women are less likely to die, and make a claim, than men of the same age. Consequently, women pay lower premiums for life assurance. Annuities With annuity contracts payments are made until an individual dies. Consequently, the impact of mortality on annuities works in the opposite way from life assurance. The longer an individual is expected to live, the lower the annuity income for a given retirement fund value. On average, women are likely to live longer than men, so will receive a lower annuity income for the same fund value than men as the annuity would be expected to be payable for a longer period. Critical Illness For critical illness contracts a payment is made on occurrence of one of the illnesses covered under our policy conditions. The CMI data shows that men are more likely to claim than
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women across most ages. Therefore, premiums will be higher for men in some age groups, and for women in other age groups. Income Protection Income Protection insurance pays a regular benefit to individuals who are unable to work due to sickness covered by the policy. The premium charged for this cover will depend on the likelihood of making a claim, and the length of time a claim will be paid for. The CMI data shows that women are more likely to make a claim than men for the majority of age bands. In addition, when a claim is made under a policy men generally recover quicker than women, resulting in claims for a males being payable for a shorter time than for a females. Therefore women pay more than men for the same benefit amount under Income Protection policy.
Friends Provident Life Assurance Limited Salisbury Office: United Kingdom House, Castle Street, Salisbury, Wiltshire SP1 3SH Registered and Head Office: Pixham End, Dorking, Surrey RH4 1QA Incorporated company limited by shares and registered in England number 782698 www.friendsprovident.com Telephone 0845 602 9189
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