From December, life insurance policies will become the same for men and women. Rachel Dalton finds out what IFAs need to do to prepare for the change.
In March 2011, the European Court of Justice (ECJ) ruled that basing insurance contract pricing on gender will be outlawed from 21 December 2012.
A year on, the government has just closed its consultation on how the ruling can be implemented in the UK. While providers are already preparing for the change, some advisers are gearing up to use the reform as selling-point for protection.
Market changes
Prices are expected to change in the run up to December. In life insurance, there are predictions women, who usually live longer, will be forced to pay prices more in line with those of men, rather than men’s rates becoming cheaper. Others have claimed prices will meet in between traditional men’s and women’s rates.
From December, life insurance policies will become the same for men and women. Rachel Dalton finds out what IFAs need to do to prepare for the change.
Where insurers have a customer base which is mostly of one gender, insurers have said they will be able to continue to offer competitive prices which are more or less based on the longevity of the majority of their client base, as long as they are open to people of either gender.
The effects on advice
Steve Casey, head of marketing and intermediary proposition development at Friends Life, says: “We have already had requests from IFAs for off-the-shelf marketing campaigns they can use in the run up to December.
“Firms should first see where they source business; is it from new business or from reviewing existing cover? If you generate business from renewals, the ECJ ban may drive policy prices up and may make this difficult.”
Casey adds there are other changes that will affect prices and make it difficult for advisers to focus on renewal business.
From 2013, life insurance and critical illness cover will be taxed on profits, making the business less profitable for insurers and likely to cause price increases of up to 10%, Casey said.
This too gives advisers good reason to complete protection sales now if they can, he says.
The effects on providers
Gavin Park, consultant at Munro Partnership, says providers may attempt to cash in on the ban.
“Providers could use the change as a selling point as an area that the legislation does not affect is the option for providers to use marketing and advertising to influence the gender mix of their target market,” he says.
“They could effectively take a ‘buy now while stocks last’ approach.” However, Park adds that the ban is likely to improve the market overall.
“The changes will have positive benefits as it will give individuals premiums of a fairer weighting and, in due course, competitive pressures will determine the costs of obtaining the insurance they require.”
What to do in the time left
Casey says: “IFAs should review their client base and see if there are any protection needs that have not been covered.
“Then they should talk to clients and see if they want to take out policies now; in this situation, guaranteed minimum products can help.”
Richard Fyfe, chartered financial planner at Fyfe Financial, says the rule changes could be used to prompt clients who have been considering protection to action.
“If protection clients are taking a long time to decide over a policy we may mention to them that the rules are about to change, but this is done on a case-by-case basis,” says Fyfe.
However, Fyfe adds that the rule change is unlikely to persuade clients who do not want protection at all to buy it, but that it will only spur on people already considering protection.
