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Double blow for life insurance prices

A broken piggy bankThe insurance industry is facing the biggest upheaval in years and life cover is one of the areas that will be seriously affected, with premiums likely to rise by 21 per cent or more. 

From 21 December, insurers in the UK will no longer be allowed to use a customer’s gender when deciding how much their policy will cost.

This is due to a European Court of Justice ruling that decreed EU rules banning sex discrimination should be extended to the insurance market.

Bad news for women

Until now, life insurance prices for women have, on the whole, been lower than for men.

This is because women tend to live longer, so are less likely to make a claim on a life policy.

Women are less likely to make a claim because most policies only run for a fixed number of years, not because women are less likely than men to die.

But from 21 December this year, this will change and insurers will increase prices for women, and possibly reduce them – although probably by a lower proportion – for men.

Good news for men?

But, if you’re a man, you shouldn’t start celebrating just yet.

The discrimination ban is not the only change facing life insurance providers and potential customers at the moment.

As of the start of 2013, new rules on how life insurance companies are taxed come into effect.

At present, firms can offset their expenses against investment income when they work out how much profit they have made.

Insurers pass on higher tax bills

This means that taxable profits – and therefore tax bills – can be lower.

But from January, insurers will no longer be able to use their expenses to reduce profits, and their tax liabilities will increase.

These extra costs will inevitably lead to higher premiums for life cover for all customers, regardless of their gender.

The early signs are that many insurers will make price changes to reflect both the gender ban and the new tax regime at the same time – and that is likely to be on or before 21 December.

This week, for example, insurance giant Aviva confirmed it would take this approach.

How will premiums change?

Based purely on the gender ban, it might make sense for men to wait until after 21 December to buy life insurance, or to look for cheaper premiums.

But the changes in tax rules will push up prices for both sexes, so this strategy is unlikely to pay off.

For women, the situation is much more urgent.

According to exclusive research by, the EU gender ruling could push up life insurance costs for women by as much as 21 per cent.
This is based on the difference between a male and female level term policy with a sum insured £150,000, over 10 years and non-smoking at 34 years old.

And the Actuarial Profession, a body for those whose job it is to work out the financial impact of various changes to the insurance market, estimate that the new tax regime could see life insurance premiums rise by up to 10 per cent.

Act now to save

Matt Lloyd, head of life insurance at, said: "The message for consumers is clear.

"If you might need to buy life cover in the next few months or even years, you are likely to be much better off if you do so in advance of the 21 December price changes.

"This applies to both men and women.

"Not only are premiums likely to be cheaper, but you and your family will benefit sooner from the protection and peace of mind that life insurance offers."