Insurance gender ruling and you
Men and women, young and old, are set to notice significant changes to the cost of various types of insurance under the new European rules.
The reason is that the European Court of Justice has decided that insurers will no longer be allowed to take the gender of their customers into account when setting their insurance premiums.
Up until now, insurers considered gender because - for example - there is a difference between the sexes in life expectancy and the likelihood of road accidents.What is happening?
Insurers will no longer be able to charge different premiums to men and women because of their gender following a ruling by the European Court of Justice (ECJ).
The industry was given time to prepare for the change, but the changes have now come into effect.
The theory from the ECJ was that taking customers' gender into account contradicted laws on discrimination.
In practice, the requirement for unisex premiums is likely to affect the cost of some types of insurance, notably car insurance, life insurance, health insurance, and the cost of an annuity - a financial product that provides a regular pension income.What will this mean for insurance premiums?
Lots of figures have been thrown around by groups interested, and at times angry, about this ruling.
The likelihood is that there will be some volatility in the prices of insurance for some months as various insurance companies look at how their competitors are changing their charging structures.
But many people are likely to notice a change the next time they renew, or shop around for better, insurance.How will drivers be affected?
The most obvious shift is likely to be seen for young drivers.
There seems to be a general view that young men's premiums will fall a little, perhaps by up to 10%, but young women's will rise more, perhaps by up to 30%.
AA Insurance says an annual car insurance bill for a young woman will go up by £400 on average.Will the cost of a regular pension income be affected as dramatically?
Women may benefit from higher payments when purchasing retirement income products as they have traditionally been offered lower benefits due to their higher average life expectancies.
On retirement, many people buy an annuity - a financial product that guarantees a pension income for the rest of their life.
Annuity expert Billy Burrows, of the Better Retirement Group, says a standard annuity bought with a pension pot of £100,000 by somebody aged 65 - male or female - will be £5,803, according to the latest figures.
He says the changes resulting from the ruling are age dependent with younger men seeing the biggest cuts and older women the biggest rises.
For a man aged 55 the cut in annuity income has been up to 5%, a man aged 60 has seen a cut of 3% and man aged 65 has seen a less than 1% cut.
"It is a complicated picture but overall not as bad we thought and there are signs that some companies are increasing rates," Mr Burrows says.
The build up to the change in rules created a self-fulfilling prophecy and rates did fall significantly, he says.
"This was not all down to unisex annuity rates, it was partly due to an excess of demand over supply so companies cut rates to reduce business flow and increase margins," he says.What about life assurance?
On average women live longer and so currently pay less for life assurance than men.
Following the ruling, the ABI estimated that men could see a 10% fall in costs, while women's rates could rise by as much as 20%.
Again, the industry may only settle down a few weeks after the ruling.
Health insurance may also be affected by the changes.What other factors will affect premiums?
Obviously, more than just gender is considered when setting an insurance premium, and this will remain the case.
Other so-called "risk factors" will still affect the thinking of, and pricing by, insurance companies.
For example, motor insurance will be higher for the driver whose car has a more powerful engine, and medical insurance could cost more for those with pre-existing conditions.
The age of the customer can also still be part of an insurance company's thinking. The rules do not prohibit discrimination on age as they do on gender.What has this meant for the insurance industry?
In the short-term it has caused a lot more paperwork for the companies and their customers.
Insurers are changing their policy documents, are having to contact their customers, and are updating their computer systems.
They must also ensure brokers are giving out the correct price information and marketing is correct.
In the longer-term, they will have one less variable to consider when setting prices, but it remains to be seen if this will cut the industry's workload at all.
For customers, the advice is to shop around.What will insurers across the rest of Europe do?
Most insurers across all EU member states used gender as a factor in their pricing.
So, they are having to change the way they calculate premiums in the same way as insurers in the UK.