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The Actuary The magazine of the Institute & Faculty of Actuaries

Unisex pricing

In his article in the January/February issue, Stephen Richards robustly defends the current practice of setting different rates for males and females and provides justification for so doing on the grounds of differences in mortality experience between the sexes related to genetic, hormonal, environmental, lifestyle, and pharmacologically based statistics. He concludes that the EU directive is not soundly based, as it relies on its own unfounded prejudice about prima facie discrimination rather than upon factual evidence of properly evaluated risk-differentiation. I hope he is heeded: it would be a massive overturning of tradition if the industry gave in to this demand to ignore differentiation of risks between specific groups of insured.

It is interesting that this move comes when there is pressure on the industry to eliminate cross-subsidised risk-pricing entirely. It’s all part of the move in Western culture from the concept of community to that of the individual; from defined benefit where the employer carries the risk, to defined contribution where the risk rests with the employee, from with-profits policies designed to stabilise outcomes by sharing of experience to unitised contracts subject to higher volatility directly related to the individual policyholder’s investment dates.

Strangely, to eliminate sex differentiation would be to reverse this trend. If we reduce differentiation of risk from two classes to one, we increase the element of cross-subsidy on which insurance is based, to the benefit of one and the detriment of the other, but not necessarily for the greater security of both. Females would pay more for life assurance, but get better rates when buying a pension, though their husbands would pay more for their pensions and less for their widows’ pensions! That’s the result of re-integration.

Perhaps it is a paradox we shall have to learn to live (or die) with.