It's not just the Olympics that will make headlines in Britain next year - the gender pricing directive comes into force in 14 months. So what should IFAs do now to prepare for it? Duncan Heald investigates
For pure life insurers, it seems that male prices won’t change much, but female prices will go up significantly.
Next year is therefore a clear marketing opportunity to ensure that females buy the cover they need (expect slogans such as: “Buy now while stocks last!”).
The biggest risk around best advice seems to be in the annuity market. There is also a potential mis-selling issue if females are being advised to buy their annuities now when there is a chance they will be able to buy a larger pension in more than a year’s time.
Consideration of income withdrawal until 21 December 2012 for these lives seems essential.
A similar argument applies to encouraging male lives to consider buying their pension now.
The above examples demonstrate why the adviser community not only needs to be aware of the impending changes that will happen at the end of next year, but also that they need to consider the impact now.
THE PROTECTION MARKET POST-2012
So, there are opportunities for brokers on the protection side to take advantage from prior to the gender equality change. But how might insurers do things differently once gender-neutral rates come in?
Continuing on the term assurance theme, women will be relatively more attractive or profitable to insurers, so will this change behaviours? The ECJ ruling means that insurers can’t differentiate on price, so will they use other strategies to attract women through female-friendly products, distribution or marketing strategies? Several different product development opportunities seem to present themselves.
One of the problems with the financial services industry is that the products have mostly been designed as one-size-fits-all and this does not help address the customer engagement problems that the industry faces.
The ECJ ruling may force the market into addressing this and considering designing different products for men and women.
Coming up with separate products that attract either men or women is quite a big departure from what happens today.
Therefore, providers may just look to continue having one product, but tweaking it to make it more attractive to the more profitable females by, say, covering more female-specific conditions and female-friendly product features.
All the same, there is a good argument for continuing with the status quo as a strategy that attracts males and females will by nature be attractive to the whole of the market and likely to generate more volume than other strategies.
Men make up about 60% of the current market, so clearly the industry must not neglect its male customers.
Any regulatory change, good or bad, brings opportunity to gain a competitive edge and the ECJ ruling is no different.
There is definitely scope for knowledgeable and informed IFAs to develop profitable sales and marketing strategies both in 2012 and beyond.
One certainty is that over the next year, activity around this important subject will increase. But will the industry or its individual firms maximise the opportunity it is presented with?
Duncan Heald is a marketing actuary at SCOR Global Life
