Life insurance using sex as a factor

This requires us to begin with a distinction between sex and gender. For these purposes, the life insurance industry relies on biological sex and not on gender which can, by surgical and other treatments, be reassigned. No matter what the current status may be, it's the genetic coding of the body that decides life expectancy. This does, of course, raise some interesting questions of privacy but this is not the place to examine the problem in detail. Back to sex: no matter which set of statistics you look at, every measure shows women living longer than men. The question that arose before the European Court of Justice was whether this statistical fact justified a difference in the life insurance premium rates. The answer was the different rates were an unlawful discrimination. As from December 2012, all European insurers have been obliged to set the rates without taking sex into account.

To understand the nature of the debate, let's look at a few examples. If a man and a woman take out a life insurance policy for a fixed $500,000 at the same age and the same premium rate, the woman will live longer and so, if she pays every year, she pays more than the man to arrive at the same result. But if the same couple buy an annuity, the man will not live as long so should pay less. The woman should pay more to fund herself during all the extra years of life. In America, the insurance industry works on the statistics and almost always sets a lower premium rate for women for a straight life policy. That would appear to be fair. In Europe, women must now pay more for a longer period to receive the same guaranteed minimum. Except, in a whole or universal life policy, the cash value will be appreciating. The longer a woman lives, the more the cash value will appreciate. Equally, the more management fees and charges the life insurance company can deduct. So if a woman must pay more, this gives more generous death benefits to her family and more profit to the life insurance company. You can understand why the European insurers did not fight too hard to prevent this ruling.

So far, there's no sign of any litigation in America to disturb the current industry practice. That means women will continue to pay less for whole and universal policies. For term life policies, the annual premium rates are more similar between the sexes. Over a term of up to twenty years with the insured no more than 40, the sexes are equally likely to survive. But when it comes to annuities, women must pay significantly more than men for the same guaranteed payments during the lifetime of the policy. No matter whether you think that a fair outcome, that's the way the life insurance industry is going to work unless and until the law changes.