The new EU Gender Directive that has been put into action this December 2012, will undoubtedly impact numerous companies in the health insurance industry. Historically, insurers have always structured premium prices based on the gender of the applicant. The most common use of gender as a determining factor in policy premiums lies in regard to the coverage of maternity benefits. As pregnancy deals with only one gender and can be very expensive, there are undoubtedly going to be cost implications for those applicants who have planned not to (or cannot) become pregnant.
The two major EU based international private medical insurers particularly affected by the Directive are IMG and Integra Global, who have each chosen interesting methods to comply with the new regulations. IMG has taken a gender neutral pricing approach; plan structure and benefits remain the same but pricing will be based on a weighted average of the risk to the two sexes. This is how most insurers in the market (Bupa International, AXA PPP etc) typically tend to price their plans. The approach taken by IMG is a straightforward response to the new Directive. Easy to manage and simple to explain to clients, it includes the following advantages:
Clients outside the age bracket where maternity is not an issue see no change in benefits or significant premium adjustments.
In the age bracket where maternity is an issue, many female clients (around 50%) will see premiums drop, but men remaining under portfolio will see a steep rise in premiums without change to benefits.
Couples together on the plan will see no change as the rise and fall will balance out. The new approach is the easier option for the insurer to implement, requiring only a change of rate calculation per policyholder.
This week, IMG announced implications of the change to premiums, and analysis shows that male premiums will rise between 10-50% depending on age, with greater impact for those closer to age 30. Conversely, female premiums will reduce by 6-30%. IMG has combined the Gender Directive changes with the April 2013 premium review, and rates being published will now be fixed for the whole of 2013. As such, at least 10% of the increase in cost can be offset as effects from medical inflation. Men are likely to be negatively affected by the changes, yet reception of these adjustments remains to be seen. However, if this decreases the retention of plans, there is a risk that female rates will rise regardless in order to minimize the risk of men leaving the portfolio.
Another major international private medical insurer impacted by the new Directive, Integra Global, revised plan designs in response to the legislation. Redesigning plans is a more radical move, and requires significant investment and time to explain options to clients come renewal time.
Integra is introducing four new plans that are tailored to specific target groups, such as families and individuals. The new plans focused on individuals are named ‘YourLife’ and ‘PremierLife’ while the plans structured for families are titled ‘YourFamily’ and ‘PremierFamily’. These plans have been structured for clients selecting plans based on maternity or non maternity needs, making them gender specific anyway. The plans are a slightly more complex than simply including or excluding pregnancy cover, but the impact of this benefit on pricing will largely determine people’s decisions. Integra’s novel approach involves some risk as changes need to be explained to clients, making the retention of policyholders over the next 12 months crucial.
The Gender Directive currently only affects EU based insurers, while the likes of HTH (who still base price on gender) have yet to be impacted. However, it may only be a matter of time before similar Directives are introduced as a global standard.