The Gender Directive is creating a fluid situation in protection markets, with insurers only just coming to conclusions. Andy Milburn outlines the state of play so far.
If you write protection and are starting to worry about the impact of the EC Gender Directive on your business and customers, you are not alone. Who saw this coming in the protection industry ten years ago?
A number of intermediaries have recently asked Ageas about the Directive. Fewer mentioned the I-E (income less expenses) tax regime changes that happen on 1 January 2013. We need to look at the impact of both sets of legislation together.
Gender-neutral pricing begins in the first seconds of 21 December 2012 (now called "G-Day"). Ten days later, on 1 January 2013, the I-E tax regime change happens.
What's changing?
The I-E tax regime in the UK currently allows protection providers to offset some of their tax liability on trading profits made from their protection business against their investment business. This will no longer be allowed. Income protection is not currently part of the I-E tax regime, so is not affected by this change.
The Actuarial Profession stated in March 2012 that removal of life and critical illness cover from the I-E tax regime "is expected to increase the price for term life insurance and accelerated critical illness policies by around 10%; which may create more market distortion than the move to gender-neutral pricing".
Hold that thought, add the major issues that gender-neutral pricing brings alongside it, and then stir for 20 minutes until you become nicely worried.
The costs of life cover and life cover with critical illness cover for women are expected to increase when gender-neutral pricing is introduced. Women could be facing a ‘buy now while stocks last' period for new business on these products in the run up to 21 December 2012.
The same opportunity may apply to men with income protection cover too. Men could face a potential rise in their income protection cover premiums for new income protection business on or after 21 December 2012. We will consider new business opportunities later in this piece.
Protection providers across the country are going to have to figure out how they deal with a number of issues and challenges in the months running up to the introduction of gender-neutral pricing. In turn they will have to help intermediaries through the process.
Some of the key issues for existing customers (with policies on risk pre-21 December 2012) include reinstatements, indexed premium increases, mid-term alterations, exercising guaranteed insurability options and increases to existing policies.
