19 October 2012
IN THIS ISSUE
Introduction
Recent News
Employment & Investment Incentive (EII)
Personal Insolvency Bill Explained
Quintas Quarterly Economic Review
The Cost of Equality
Give Up Your Old Currency for Special Olympics
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The Cost of Equality
by Lynda McAuliffe
 
Lynda McAuliffe

“Love and work are the only two real things in our lives. They belong together, otherwise it is off. Work is in itself a form of love.” – Marilyn Monroe

A hundred years ago women’s paid work was narrowly defined even if you were an educated woman. In the late 40s and 50s women were very much the typical housewives. Then came the 60s and the Women’s Liberation that changed all of that. Nearly a century later women in most nations have won the right to vote and progress is being made for workforce equality.

Women in every socioeconomic class, at every stage of their careers, work hard to meet their responsibilities at work and at home. Juggling work and family has never been easy. In today’s economy, it seems harder and harder to maintain a balanced lifestyle while simultaneously achieving career nirvana. Women play such an important part in the life of the family and are truly strong in their ability to handle it all.

Women today are committed to working for a living in an equality based environment. In the mid-1980s one third of women of working age were part of the labour force, today three fifths are in paid work. Women are altering the stereotypical role of woman as provider in the home to incorporate woman as a provider in the workplace. The cost to women for achieving this includes reaching a level of impressive multi-tasking and  finding the energy to do it every day; and now there will be a financial cost further to the latest ruling by the European Union on insurance premiums and pension pay-outs.

From the 21st December 2012, insurers will no longer be able to use gender as a factor in the calculations of premiums and benefits, following a ruling by the European Court of Justice. The decision means insurers will have to change the way they price life and critical illness policies, annuities, private medical insurance, travel insurance, motor insurance and other types of cover where data shows that the sex of the insured can have an effect on the risk.

Recently, under the existing edict from Brussels insurance companies have been allowed to discriminate between the sexes when setting insurance premiums and pension pay-outs – as long as they can justify doing so. However EU bureaucrats have had a change of heart and decided to ban insurers from ‘discriminating’. An ECJ Advocate General issued a non-binding opinion on the 30th of September 2010 that concluded that the use of risk factors based on gender in connection with insurance premiums and benefits is incompatible with the principle of equal treatment. Critics say this flies in the face of a mountain of evidence, which warrants treating men and women differently.

On average, women live longer than men, but have higher sickness rates. Women tend to have fewer and smaller motor insurance claims than men, especially at young ages. So, currently, women can avail of cheaper life cover and motor insurance than men, whereas they pay more for serious illness cover, income protection/disability cover and pensions.

The Society of Actuaries in Ireland state that requiring insurers to charge unisex premium rates mean they will need to make an assumption about the mix of male and female customers. They will need to allow for the uncertainty involved and for the risk of a potentially unfavourable mix. Therefore unisex premiums are likely to be higher than the weighted average of equivalent male and female premiums. Overall costs are likely to rise, and this increase will ultimately be borne by the consumer.

So what does this mean for all of us ladies? This is a difficult question to answer as insurers and life companies are still working out how to deal with these changes, remain profitable and retain customers. Quintas Wealth Management predict that insurers are likely to raise the cost of life insurance for women, up to the level of that for men. Women buying life assurance could see premiums rise by up to 20 per cent while men could see a fall of about 10%.

Pension annuity rates will also be affected. The most common option at retirement is to use your accumulated pension fund to buy an annuity from an insurance company. This is a guaranteed income for the rest of your life. The amount of income you receive will be based on, among other things, your life expectancy at retirement – so will vary by retirement age and gender – and the size of your retirement fund!

Annuity rates for men, who statistically don’t live as long as women are likely to decrease. Women on the other hand, who can expect to live four years longer than men, are likely to find themselves better off. Men nearing retirement could see an 8 per cent reduction in annuity rates while rates for women could rise by 6 per cent. According to The Pensions Board women on average earn less than men, are more likely to be working part-time, have fragmented career patterns and are also living longer than men, all of which leaves them particularly susceptible to poverty in later life. These are factors which make it all the more important for women to take out a pension than men. Despite these factors, women still fall behind their male counterparts in terms of pension coverage at 50.6 per cent compared to 58.3 per cent of men. Therefore most annuities are currently being bought by men, so women will be negatively impacted anyway if they rely on their husband’s pension for their retirement income.

Quintas Wealth Management recommends that now is the time for you review your existing protection and pension benefits. Costs of valuable protection products, designed to protect families from financial hardship in the event of a loved one dying, have been falling for many years due to the market becoming increasingly competitive. Yet the gender directive, which has serious implications on all life assurance products, has the potential of bringing the costs for protection for women up to the same level that men pay, despite life expectancy being so different. Quintas Wealth Management urges women to act now, to ensure they are getting themselves life insurance at much lower costs than those who wait until next year.

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