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EU Gender Directive

I have heard in some media reports over the past few months about the EU Gender Directive which will push up insurance costs as soon as it comes into force. Can you please explain what this is and what the likely effects will be.

Whilst European and Irish Law ensures that people have equal access to goods and services regardless of gender, insurance companies had up until very recently a specific exemption as it was deemed that a differential was justified based on sound statistical information. However a Belgian consumer group challenged this convention and were successful. The result of this is the EU Gender Directive which comes into force on December 21st of 2012.

Traditionally when insurance companies were offering an insurance quote, one of the factors that determined the price was gender.

For example men tended to pay more for life assurance than women, as life expectancy for men is lower than life expectancy for women. Another example is that women tended to pay less for car insurance, as statistically women were considered to be safer drivers than men. The EU Gender Directive forces insurance companies to disregard a persons’ Gender when determining price for insurance. Whilst they are entitled to gather such gender information, it cannot be used for pricing purposes.

In effect from December 21st 2012 premiums for new insurance contracts will have to be calculated on a unisex basis. This will have a range of consequences for your personal insurances. For example:

Life Cover – costs for men may fall and costs for women may increase

Income Protection – costs for men may rise and costs for women may decrease

Car Insurance – Cost for women may increase but costs for men may fall.

Annuity Rates for Pension Provision – May fall for men (a lower pension annuity income in retirement) but may rise for women (a higher annuity pension income in retirement). However there is an interesting exemption to the Directive which relates to Employer Related Schemes / Contacts. The Directive only relates to insurance that is private, voluntary and separate from employment relationships. One consequence of this would be that in certain circumstances annuities purchased by company pension schemes will continue to be determined using gender specific rates. In essence under some company pension schemes there would be no fall in annuity pension income in retirement for men.

What can you do?

In effect, nothing. At best the cost of your various insurances may balance each other out in the sense that some of your insurance costs may rise and some may fall, but as this is a legal requirement there is no way of avoiding or challenging it with your insurance company. They are obliged to implement the EU Directive.