What does insurance look like without gender in the equation?
The EU Gender Directive came into force on December 21, 2012. Based on a ruling by the European Courts of Justice, it meant that insurers could no longer consider an individual’s gender when calculating any insurance rates or benefits.
This was a big change for the retirement industry, which led to a fundamental change in the way we calculate annuity rates. As a result we’ve seen an equalization of male and female annuity rates, with female rates improving slightly and male rates falling slightly.
The conventional wisdom at the time was that this change in rates would drive a spike in demand as male annuitants looked to secure ‘pre-Gender Directive’ annuity rates. Indeed, there was considerable comment and coverage in the market encouraging men to think about retiring before the EU Gender Directive came into force.
However, looking at annuity sales over the last year, we see that the Gender Directive had a far more profound and long lasting effect on the market than the anticipated ‘spike’.
This graph shows the percentage of males retiring with an annuity from Aviva
based on individual cases (rather than by volume). You can see that the market trend (which had been steady at 70 per cent since 2007) begins to change rapidly in the second half 2012 as an increasing number of men bought an annuity before the Gender Directive came into force.
Everyone expected this to happen to some extent, but what’s surprising is the sheer scale of this behaviour. Where many had anticipated a short spike in demand before December 2012, what we actually saw was a massive increase in the number of men bringing their retirement forward to benefit from pre-Gender Directive annuity rates. In fact, the trend, which started in August 2012, is so great that it subsequently depressed the market until May/June of the following year, as many men who would naturally have retired in that period had already done so.
Clive Bolton Aviva’s managing director of At Retirement