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

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.

Pricing challenge

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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