Gender Neutral Insurance Malta Actuarial Society Prepared By: James Hewitson, Head of Insurance HSBC Life Assurance (Malta) Limited 1 PUBLIC
Gender Neutrality Time-line 09/12/00 13/12/04 21/12/07 01/06/08 01/03/11 22/12/11??/??/?? 21/12/12 European Council call to arms Initial Gender Directive Initial cut-off date Test-Achats challenge Belgian opt-out Court of Justice ruling European Commission guidance Inclusion in local statute New cut-off date 2
Article 5 of Council Directive 2004/113/EC Equal treatment between men and women in the access to and supply of goods and services Regulated use of actuarial factors relating to gender in insurance and other related financial services Article 5(1) For new contracts concluded after 21/12/07 the use of gender as an actuarial factor must not result in differences in premiums and/or benefits Article 5(2) Exemption to allow Member States to maintain proportionate differences in premiums/benefits based on relevant accurate and regularly updated actuarial/statistical data Exemption due to be reviewed after 5 years to ensure that it continued to be justified 3
Who is = The Belgian Which Non-profit organization which promotes consumer protection. Founded in 1957 and publishes research in a subscription magazine. Promotion and protection of consumer interests, the search for solutions to their problems, help in the attainment of their rights (freedom of choice, access to information, access to justice, right to health, safety and a healthy environment, education and training). Conducting comparative tests and highlights products that offer the best quality / price ratio. Seeks, whenever possible, to reconcile consumerism and sustainable development. Supports the most vulnerable consumers, including by trying to apply the concept of universal service in different sectors (e.g. banking, telecommunications, energy). 4
Court of Justice Ruling: Case C-236/09 Declared Article 5(2) invalid from 21/12/2012 Counter to objective of equal treatment between men and women Incompatible with Articles 21 and 23 of the Charter of Fundamental Rights of the European Union Only applies to new private voluntary contracts Only applies to premium & benefit calculations and NOT: Requesting / Collecting / Storing gender data Reserving Reinsurance Marketing / Advertising Life & Health Underwriting Gender specific insurance product / options Use of correlated risk factors provided still true risk factors Occupational schemes / Business Protection 5
New versus Existing Contract? Not defined in Directive Commission Guidance on New : Contractual agreement requiring expression of consent by all parties Amendment to existing contracts with consent by all parties where latest expression of consent occurs from 21/12/12 Commission Guidance on Existing : Automatic extensions Adjustment on basis of predefined parameters (Insurer unilateral) Pre-agreed top-up or follow-on policy (Policyholder unilateral) Portfolio transfer 6
What specifically is still allowed? Different application forms Different medical tests Different interpretation of medical tests Different reference values Different prognoses for the same disease Different allowance for physical differences Define treatment claim benefits 7
Issues & Challenges A practical example? 8
Issues & Challenges Game Theory! 9
Issues & Challenges Game Theory! 10
Issues & Challenges Game Theory! 11
Issues & Challenges Game Theory! 12
Issues & Challenges Game Theory! 13
Issues & Challenges Game Theory! 14
Issues & Challenges Game Theory! 15
Issues & Challenges Game Theory! 16
Issues & Challenges Game Theory! 17
Issues & Challenges Implications Women won t buy golf-ball insurance any more but what about the really bad round where they lose 18 balls? Solutions: Try to make men better risks? Try to target women specifically? Find another rating factor? 18
Product Level Impacts - Motor Malta largely unaffected as minimal gender based pricing Elsewhere gender is a key rating factor Young female rates expected to increase Further increase in the use of indirect factors Increased innovation to target safest drivers Price flexibility absolutely key to react to market changes 19
Product Level Impacts Life & Pensions Life Assurance: Cheaper for males, more expensive for females Annuities: Worse value for males, better value for females 20
Product Level Impacts Life & Pensions Life Assurance: Cheaper for males, more expensive for females Annuities: Worse value for males, better value for females Critical Illness: Cheaper for males, more expensive for females Income Prot: More expensive for males, cheaper for females 21
Product Level Impacts Life & Pensions Life Assurance: Cheaper for males, more expensive for females Critical Illness: Cheaper for males, more expensive for females Income Prot: More expensive for males, cheaper for females Annuities: Worse value for males, better value for females Potential pricing anomalies due to disconnects Pipeline management challenges Increased risk of cross-subsidy and anti-selection Lapse & re-entry risk More gender specific insurances and marketing 22
Issues & Challenges What Next? Transitional arrangements and risks Indirect discrimination Use of correlated rating factors Anti-selection and ongoing risk management AGE? HEALTH? 23
24 THANK YOU