FOR INTERMEDIARY USE ONLY
Seizing new opportunities
Impact and opportunities of regulatory changes
April 2012
Agenda
①
Background to EU Gender Directive
②
Understanding “I – E”
③
Impact of changes
④
The opportunity
⑤
Why PruProtect?
The path to gender neutral pricing
2004
EU gender directive requires equal treatment of
men and women in sales of all goods and services.
Insurance companies are allowed an opt-out
providing they can show statistical and actuarial
data to support gender differences in premiums.
June 2008
Test Achats, a Belgian consumer watchdog
challenges the opt out.
March 2011
European Court of Justice delivers judgement that
opt out will be invalid from 21 December 2012.
21 December 2012
Insurance companies must treat men and women
equally for benefits and premiums.
What does equal treatment mean?
Premiums
Must be the same for men and women.
Indirect
discrimination
Not permitted (e.g. cannot use shoe size as an
indicator of gender).
Marketing
Products may be marketed to a specific gender
but product must be available to both.
Underwriting
Can take account of biological differences (e.g.
only ask females for breast cancer family history).
Data records
Can record the gender and this can be used for
internal risk management.
Impact of move to gender neutral premiums
Current market position
Life Cover
•
•
Female rates are 20-30% lower.
Differences are most significant at young ages (under
age 45).
Gender neutral market position
Male
premiums
Female
premiums
Male
premiums
Female
premiums
Male
premiums
Female
premiums
Life and Serious Illness Cover
•
•
•
Difference depends on age and term.
At younger ages (under age 45) female rates may be
higher than male rates - females have high cancer risk at
these ages.
At certain older ages male rates are generally higher men have higher risk of cardiovascular disease.
Income Protection Cover
•
•
Female rates are significantly higher than male rates at
all ages.
Female rates c.70% higher.
Implementation of gender neutral rates
Plan 1
Application
submitted
Plan 2
Application
submitted
Plan 3
Gender
neutral rates
Plan
activated
Application
submitted
Now
•
•
Gender
specific rates
Plan
activated
Plan
activated
Gender
neutral rates
21 December 2012
Pipeline cases must be activated by 20 December to receive gender specific rate.
Existing business will not be affected, including Indexation and Guaranteed Insurability Benefit.
Taxing times
• 1 January 2013 - new corporate tax regime for life insurance
companies will be implemented.
• Life Cover and Life and Accelerated Critical Illness traditionally been
taxed on an income – expenses (“I–E”) basis.
• Most (but not all) life insurance benefit from I–E tax basis.
• Created significant tax advantages leading to lower premiums.
• New regime removes these advantages increasing tax bill of most
life insurance companies.
• Companies with a higher tax bill are likely to offset this by increasing
premiums.
Possible impact?
It probably means that for a
large number of insurance
writers those premiums will
rise by 5 to 10 %
Nigel Cooke3
From December 21 male term
and CI rates will increase by up
to 5% and female term and CI
rates between 20% and
25%. For IP male rates could
increase by 10% to 20%, but
females rates could fall by 15%
to 25%.
Martin Werth2
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%
Steve Casey1
35%-50% increase for
females, 0-10% decrease
for males
ABI research paper no 24,
2010 – The use of gender
in insurance pricing4
Sources:
1. http://www.ifaonline.co.uk/professional-adviser/feature/2162586/prepare-genderless-protection
2. http://www.moneymarketing.co.uk/protection/martin-werth-the-gender-pricing-race-against-time/1047916.article
3. http://www.moneymarketing.co.uk/news/budget-2011/budget-2011-protection-tax-reform-could-hit-premiums/1028301.article
4. http://www.abi.org.uk/Publications/51810.pdf
Expected rate changes for Gender Directive
and tax changes
Age
Life Cover
male
Life Cover
female
CI
male
CI
female
30
+3%
+21%
+6%
+11%
40
+3%
+21%
+4%
+16%
50
+2%
+22%
+3%
+20%
• Average rates for non-smokers, term to 65, from three insurers
• Assumes new business mix of 70% males
• Assumes tax change impact of 7.5% premiums
Source: Martin Werth, Managing Director of Living Benefits, April 2012
http://www.moneymarketing.co.uk/protection/martin-werth-marketing-protection-to-women/1049420.article
Opportunities
• Regulatory changes likely to lead to premium increases.
• The potential changes provide motivation for customers to buy cover
now rather than delay.
• Target particular customer profiles:
–
–
Life Cover and Serious Illness Cover particularly attractive for females.
Income Protection Cover particularly attractive for males.
• Add value through advice – comparison sites can’t alert clients to
future market changes.
• Awareness of the changes will grow as the implementation date
approaches. Start now to ensure you are the first to reach your
clients.
Why PruProtect?
Providing
relevant cover
Rewarding health
and wellness
Supporting you to
grow your business
Providing relevant cover
Mastectomy
•
•
Covers both ductal carcinoma in situ of the
breast and lobular carcinoma in situ of the
breast
Maximum payout 20 times nearest
competitor
Lumpectomy for ductal
carcinoma in situ of the breast
•
First provider to add this cover
•
Maximum payout eight times nearest
competitor
Systemic lupus
erythematosis
Rheumatoid arthritis
•
•
Three times as many women are affected
compared to men1
•Nine times as many women are affected compared
PruProtect is the only provider to pay on
diagnosis only
•PruProtect is the only provider to pay on diagnosis
to men1
only
Female clients are up to 76% more likely to receive a payout if they have a
PruProtect policy (based on a 45 year old female)2
Sources
1
2
BBC - www.bbc.co.uk/health
Hannover Life Re UK, February 2010
Based on Hannover Life Re UK’s interpretation of general population incidence rates and their estimate view of future trends. Incidence rates for the entire population may be different
to those who take out life insurance products. The typical critical illness product is a comprehensive one and covers most conditions seen in the market. PruProtect estimates are
based on the PruProtect Comprehensive Plan..
Rewarding health and wellness
Supporting you to grow your business
• Support from your PruProtect Business Consultant
• Presentations
• Coming soon - Marketing toolkit (including sales aids, acquisition
letters and emails)
• Direct access to our underwriters so that your underwriting questions
can be answered quickly