UK firms are allowed until December 2012 to price their products differently for males and females where they can rely on credible statistics. MPFS only seeks to adopt differential pricing for 2 products - life assurance (level term assurance & mortgage protection plans with or without critical illness) and, until September 2011, income protection plans. The statistics we rely on are national statistics derived from similar plans written by other insurance firms and published by the Continuous Mortality Investigation (CMI) bureau. A summary of these statistics may be found at www.actuaries.org.uk/knowledge/cmi/gender.
Life assurance premium rates are derived from detailed CMI mortality (and critical illness, where applicable) statistics, which differentiate death rates by age, gender, and smoking status. To the extent that these statistics reflect the difference between genders, they are now published in simplified form by the CMI bureau - for the purpose of the gender discrimination legislation.
For most age groups, this shows male mortality being between 130% and 160% of female mortality, but at young ages the differential is over 200%. In consequence, the rates we charge for males are higher than for females.
For critical illness at ages below 60 (the maximum age we cover), the claim rates for males vary between 90% and 130% of female rates. Accordingly, the difference in the rates we charge for life assurance with critical illness is less than the corresponding contract without critical illness.
Our income protection rates do not vary by age - we take the view that the increasing likelihood of claim with higher ages is offset by the shorter period over which a claim could be paid (potentially to age 60, on the current policy conditions). We introduced a non-smoker discount in 2007.
Over the period we have been running the income protection plan, it has been clear that average claims costs on females were well in excess of those on males, for otherwise equivalent risks. Our statistics are not based on sufficient data to price this product fairly, so we have in the past charged females up to 80% more than males.
From October 2011, we are altering premiums to remove the gender differential. At the same time we are increasing the rate for smokers. Existing business is included in this review. There is no change to the premium charged to male non-smokers.
