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Brexit and Gender Neutral Pricing - what happens next?

Posted by
08 Sep 2016
I've worked in the General Insurance market for over six years, recruiting Actuarial and Pricing professionals on behalf of some of the UK's largest insurers.

In that time (apart from Solvency 2) one of the more interesting elements of regulation to come from Europe was the Gender Directive in 2012.

Following the somewhat surprising referendum result, the question of what may change for General Insurers in a post-Brexit environment, has cropped up in numerous conversations with candidates and clients.

One of the questions some have pondered, is whether General Insurers will return to using gender as a risk factor when pricing insurance (it is worth noting at this stage that insurers attribute significant weight to the use of gender as a risk factor, favourably for women who are deemed a lower risk than males).

So as to whether we will see a return to gender based pricing is not that straight forward it seems...

When speaking with an ex-Head of Motor Pricing, who worked for a large personal lines insurer, he argued that whilst insurers no longer directly used gender as a risk factor when determining an insurance premium. Insurers have instead opted to use proxy risk factors that indirectly provided an indication of gender, and therefore determine the level of perceived gender risk.

In motor insurance, the make and model of certain vehicles is awarded greater discount if they are more likely to be driven by a female (a Mini Cooper or Fiat 500 for example), given female drivers are a lower risk compared to males. Likewise those cars which were identified as more likely to be driven by a male, are considered a greater risk and will incur a higher premium.

Insurers also look at the occupation of those who are insured, and typically attribute higher levels of discount to occupations which are predominantly female (nursing for example). Whilst occupations considered to be predominantly male, such as construction will experience a higher level of premium.

So whilst insurers are still not pricing directly on gender, they can build a slightly better risk profile of customer by attributing more significance to certain proxy factors which provide an indirect indication of gender.

The use of proxy factors is not perfect however, as some males could end up with smaller premiums than before, if for example they drive a vehicle or have an occupation which is deemed by insurers to be predominantly 'female' - this skewed pricing could also be experienced by females who drive predominantly 'male' cars and work in predominantly 'male' occupations.

So given that General Insurers are still, in some way, able to indirectly use gender as a factor it is unlikely there will be a rush to revert to the models used prior to 2012 and upset the apple cart. Particularly when considering the potential negative publicity this could create for insurers and the wider industry by reverting to what some feel is an unfair and ‘old fashioned’ way in which to price insurance.

Whether the Life Insurance industry will want a return to gender based pricing is a completely different question…

To discuss the developments in Gender Neutral Pricing even further or for insight into the current trends within the finance arena, please contact me on 0151 224 1480 or email Contact Me
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