Searching for the G(ender) spot- LV= comments on the EU gender directive
20 June 2012 | Protection Insight with Mark Jones, Head of Protection at LV=
With the Gender Directive (and Income-Expenditure (I-E) changes looming, providers are searching for the optimum post G Day pricing positions.
Sex is complicated – the pricing karma sutra.
With so many factors affecting premiums, there will be many sweet (G) spots depending on sex, product type, term, escalation, smoker status and other risk elements. Whilst we can give rough average indications - the movements driven by Gender and I-E could vary wildly. What is clear though is that for most, the price of insurance will go up. When it comes to cost there will be many losers, and only a few winners.
Ups and downs
Depending on the contract type, and sometimes the person’s age (a key factor for critical illness), the Gender Directive changes will mean than men and women will pay less or more by as much as 20-30%. But those gains or losses are set to be largely exaggerated or offset by the silent stealth-like I-E taxation changes. The combined effect of Gender and I-E is that overall prices for life and critical illness are set to increase by around 10-15%.
Whilst the I-E changes are set to follow Gender several days later from 1 January 2013, we can expect providers to make both sets of changes in one fell swoop.
It’s down to us to inform and encourage action. An opportunity.
It’s down to us – providers and advisers – to make our customers and clients aware of the changes, what they might mean and what action people should or shouldn’t take.
But it’s far from bad news, I believe change does equal opportunity. For some, cover will never be as cheap, and if they act now they can beat the twin evil villains – the Taxman and the Eurocrats. I recognise price isn’t everything, but in these times of financial austerity, the ‘get a good bargain whilst stocks last’ angle can provide a powerful catalyst.
Not a lot in life is straightforward nowadays. So as a professional adviser, these legislative changes present a genuine opportunity to show your worth, display your expertise and add value. When reviewing your client bank and prospects, here are some the factors and messages you might want to consider.
For existing clients with cover already in place
The Gender directive ruling only applies to ‘new contracts’ concluded after 21 December. So, all existing contracts can continue on gender specific rates. However, the EU ruling was vague when it came to alterations or things like Guaranteed Insurability Options. Providers and the ABI have lobbied for clarity and we hope that common sense prevails when HMT delivers the UK legislation over the few weeks or so.
A message to your existing clients is ‘If you’ve got cover already, don’t worry you’re safe. But if you want to change anything or increase your cover, let’s talk’.
For the waiverers, who didn’t take up your advice or recommendations
Not everyone you speak to takes you up on your recommendations. But the Gender changes open the door to getting back in touch and reigniting interest. Your message for waiverers is ‘If you’ve thought about cover but put it off (for whatever reason), it’s time to take another look. Don’t miss out… the clock is ticking.’
For those clients and prospects who don’t have protection, but who might need it
You may not have talked about protection with some of your existing clients. And there will be more prospects to meet over coming months. Gender and I-E is a great conversation piece to start exploring the need for protection. And you message to them? ‘If you haven’t really thought about cover for you or your partner, start now or miss out’.
When to start? Can’t wait, don’t wait.
With Gender, there will be no transition/ pipeline period. It’s not within our gift to do so, it is the law. Business that isn’t completed by 21 December will need to switch to a gender neutral rate. As the weeks and months pass towards G Day, there will be increasing pressures on providers to process and complete business before the hard stop on 21 December. Wherever possible, get in early. As an adviser, you can help smooth and speed the journey for you and your clients (and for providers!).
Consider your clients medical and risk profile, opportunities to use tele-interviewing, non medical underwriting limits and GPR ratios. And remember where a GPR is required, we are all in the hands of the doctors. I expect that very few clients actually have adequate financial protection. Whilst price alone is unlikely to drive a client to buy insurance, the changes represent a great chance to raise the subject.
Mark Jones is Head of Protection at LV=. If you want to share your views on pricing (G) spots, advice opportunities or pitfalls, email him at Mark.Jones@LV.com