Since the European Court of Justice (ECJ) ruling that ensured insurance products may not use gender to differentiate price or benefits, much of the focus has been on getting the eventual unisex price right, a not inconsiderable challenge for the actuaries who are faced with using past buying behaviours to predict future purchasing under a very different price.
With the publication of the European Commission (EC) report on the implementation of the ruling, underwriting has been a little forgotten, as essentially this indicated much of the gender-linked practices which are essential for good risk management.
It is important to realise this is not just a matter of waiving a few ratings on gender specific illnesses, but also affects our whole testing protocol, our medical limits, and indeed what we do with individual cases.
Ignoring differentiated normal laboratory ranges when applying ratings will soon bring the industry into conflict with the medical profession, something we need to avoid due to our reliance on their cooperation, and we certainly do not want to get into a situation where we undo all the progress we have made in linking insurance medical testing to pre-test probability, with much of this being gender linked.
For example, stopping the requesting of electrocardiograms (ECGs) on young to middle-aged women.
The more you start to think of the pricing challenge, the more the implications for the future underwriting of lives under a unisex price start to emerge.
Irrespective of where the eventual unisex price is set, it is inevitable that women will be paying much more than their risk would suggest for mortality products, and it is likely that men will be paying less than their risk.
Writing female mortality business will be highly profitable for insurers, so as well as influencing the marketing strategy of each insurer, the issue will also end up on the underwriters’ desks, as no company will want that profit being lost on cases due to overzealous underwriting.
At the very least, underwriters will be encouraged to take the lower option should a medical condition fall somewhere between two ratings. Logically, this would also suggest that the higher rating would need to be applied to male lives.
Underwriters …must not be seen to be compensating for unfair base unisex pricing through their underwriting decisions, but at the same time the commercial realities of needing to [underwrite] as many female lives as possible in order to ensure an affordable unisex price can be maintained will influence what we are asked to do.
Each decision must be defendable if challenged that it was a discriminatory rating, otherwise we risk losing the aspects of gender which we have so far successfully defended.
John Turner, is head of L&H underwriting for continental Europe at Swiss Re