Insurance, sex and the FSA
Will insurance cost more or less for a man or woman?
After 21 December 2012 insurance companies will not be allowed to use gender when setting insurance premiums or paying out benefits under policies and annuities.
In simple terms a young female driver currently pays less for insurance than a young male, as young males cause more claims. At the pension end of things men receive higher incomes when buying annuities, as women tend to live longer than men. If the sex of a person can no longer be taken into account what effect will that have on your premium or benefit?
The Financial Services Authority ought to know the answer but can only tell us what we should be thinking about:”
1. Understand the terms and conditions of the cover you are buying.
2. Consider speaking to your insurer or a financial adviser when you need to buy your cover, rather than just filling out an application online.
3. When buying a new insurance policy, consider whether the price of that policy might rise or fall after 21 December 2012. Your insurer or financial adviser may be able to help you with this.
4. Where you believe prices may fall, do make sure that you consider when you need the cover and that you do not wait unnecessarily before putting cover in place. You are required by law to have ongoing motor cover and you could also miss out on vital protection or investment returns in the case of purchasing an annuity by delaying your purchase.
5. If you are considering purchasing an annuity from a work-based or other type of pension, ensure you are aware of all the options open to you. This includes, where relevant, considering the open market option (OMO). Your financial adviser or insurer may be able to help you with this.
6. Shop around if you are considering cancelling or renewing a policy early because you think prices may rise. Take into account any costs of buying new cover before a previous policy expires, including any cancellation costs on your old policy.
7. Consider asking the insurer or adviser how insurance quotes will be treated before 21 December 2012. Any quote priced using gender as a factor cannot extend beyond the date the new rules come into practice.
8. After 21 December 21 2012, ensure you speak to your insurer or adviser to discuss the impact of any changes you are considering making to a policy you purchased before the changes were introduced.
9. If you already have these types of policies in place or are considering what insurance you might need, this may be a good time to review what you’ve got to make sure you have the right cover.”
That’s a fat lot of good! I think they are telling us they have no clue what is going to happen.
Insurance Guardian tip – many insurers will allow you to arrange your insurance in advance. Try it with your own and other insurers as it should create at least one years saving for women. We understand Direct Line allow 90 days in advance, and Aviva will allow 60 days. Let us know your experience with others.
My bet on motor insurance is that any change will be gradual. The insurers need the same pot of money from which to pay claims, and the claims will continue as before. Aren’t the insurers going to try to smooth things out a bit, the downside as ever being the good drivers (the ones who do not need to claim) will continue to subsidise the poor drivers?