Apr 11
23
Banning Gender Based Pricing ?
Insurance associations say Canada is unlikely follow the European Union in banning gender-based pricing, which is forecast to push up life and car insurance costs for millions of women across the Atlantic.
The European Court of Justice in March said insurers will no longer be able to take account of gender when pricing insurance policies from December 2012. The ruling ends a decade-long battle between the insurance industry and regulators and follows a decision by California to ban gender-based pricing in health insurance from January this year.
It will mean that insurers can’t take account of known risk factors, which tend to mean young female drivers obtain lower life insurance because they are known to have fewer accidents. When it comes to life insurance women also pay less as they have longer life expectancies, while they receive less in pension annuity income for the same reason.
“I am confident that while some may look at Europe, we would have to reflect long and hard before changing something that was so fundamental in identifying risk,” said Frank Zinatelli, vice president of legal services at the Canadian Life and Health Insurance Association. “The system that is used in the life insurance industry tries to reflect risk, so the use of gender is important.”
Canada allows insurers to take gender into account when pricing life insurance products, though the rules for auto insurance vary across the country. According to the Insurance Bureau of Canada it is prohibited to use gender in considering rates for auto insurance in five provinces, with Alberta only allowing its use for private policies and not through the government mandated scheme.
Insurance Bureau spokesman Mark Klein said he was unaware of any movement to change the status quo here.
Insurers in Europe have slammed the ECJ decision saying it will result in significant uncertainty and higher costs.
The Association of British Insurers said women under the age of 25 could see insurance premiums rise by an average of 25%, while women’s life insurance may rise by 20%. Men would be more likely to benefit, seeing a drop of 10% in life insurance premiums, but they would also see a drop in income from annuities of about 8%, it said, citing research carried out by Oxera in autumn.
“It would have an impact as its such an important factor in identifying risk,” Zinatelli said, referring to the impact on costs here if Canada were to follow suit.
California joined 11 other U.S. states that prohibit gender rating in the individual insurance market, according to an article by the California Healthcare Foundation’s Centre for Health Reporting.
The U.S. state found that women generally paid more than men for the same coverage in states that allow gender rating. A 40-year old woman paid between 10% and 39% more than a man of the same age, it said.
Insurance analysts say being able to clearly identify risks and calculate prices accordingly can bring down overall industry costs.
