The Actuarial Profession is warning that EU moves to enforce gender equality in the setting of insurance rates and pension calculations could actually lead to greater inequality.

The warning comes in response to an announcement from Juliane Kokott, Advocate General of the European Court of Justice, who claimed that the practice of setting different insurance rates and pension calculations for men and women could be in violation of EU sex discrimination laws.

The view is that social and economic factors affect the risks associated with individuals that are not necessarily intrinsically related to a person’s gender. However, gender is a clearly defined differentiator between individuals and is useful for identifying risk levels for the traits typically demonstrated by each gender. Being prevented from identifying two clear groups with different risks may lead to greater unfairness to most members of the groups.

Bill Baker, of the Profession’s health and care committee said: “Attempts to end what some might see as gender inequality in insurance and other financial services may actually have the effect of leading to greater inequality. If insurers had to give, for example, the same annuity to men and women, despite women living longer, men may well decide not to purchase these more expensive annuities. Insurers providing annuities would then have to price the annuities nearer the higher female rate. So, rather than the cost of an annuity being at the midway point between male and female costs, it would actually be at the more expensive female level.”

He added “Discrimination is, of course, wrong. But societies have to agree on what we consider discrimination to actually be. Is it unfair to offer lower rates to clearly defined groups of people (such as members of one sex), whose evidenced risk profile means they will on average have lower claims on a fund? If we were to continue down this path, it could mark the end of cheaper insurance products for what actuaries consider, based on hard statistical evidence, to be lower risk groups.”

Looking at the issue of motor insurance, Duncan Anderson, of the Profession’s general insurance committee said “We shouldn’t see differentiation as discrimination. To do so would put at risk our ability to price insurance products fairly.

“Put simply, young male drivers on average cost insurers more than young female drivers. If gender cannot be taken into account when setting premiums, young female drivers could face premiums of up to 50% higher while young male drivers may benefit from reductions of around 25%. Equally, there is also the possibility that such a reduction in premiums would enable young male drivers to afford to insure more powerful cars raising the risk of accidents further.”

He concluded: “Actuaries look at risks based on statistical evidence. If evidence shows that a particular group of motorists are more prone to accidents than other groups then insurers should be able to set prices which reflect this.”

Ends

Enquiries: Tel. Michael Scanlan on +44 (0)20 7632 1453 / +44 (0)7798 804 871 or email michael.scanlan@actuaries.org.uk

Notes to Editors:

  1. Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.
  2. The Profession is governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of the Profession in society.
  3. Members of the Institute and Faculty of Actuaries have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.
  4. The Profession is available to provide expert comment to the media on a range of actuarial- related issues, including enterprise risk management, finance and investment, general insurance, health and care, life assurance, mortality, and pensions.

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