Care Prepared Data By Age and Gender

Introduction

When underwriting insurance policies, insurance companies base their premiums on a wide variety of factors that may affect the claims cost they observe among their customers. One factor is gender.

From 6 April 2008, the Sex Discrimination (Amendment of Legislation) Regulations specify certain conditions under which insurance companies are allowed to differentiate premiums based on gender. One condition is that the use of gender as a factor in the assessment of risk for individual policies is based on relevant and accurate statistical data. A second condition is that this data must be compiled, published and regularly updated in accordance with guidance issued by HM Treasury.

This bulletin illustrates differences in claims experience between men and women for people taking out a pre-funded long term care policy.

The tables below show the ratio of male to female claim prevalence reflected in the German state social security system as at 31.12.06. This data is explained in the subsequent notes.

Important Notes

1. Pre-funded Long term Care Insurance pays regular benefits (usually monthly) to individuals who require long term care.
2. Insurance companies use rates of requiring care or mortality to calculate the terms they offer on their products. They base their assumptions on the experience that they observe among their own customers, and also on collective industry data.
3. The table demonstrates a difference in the expected probability of claims starting: females are more likely to be eligible to claim under their policy than males in many of the age bands shown.The higher incidence and longer length of claims will normally mean that women are charged higher premiums for Long Term Care Insurance policies than men of the same age.
4. The benefit under a long term care insurance policy may not start immediately a person goes into care; usually the benefit will only be paid after a specific period, called the ‘deferred period’ or when the policyholder cannot carry out certain defined functions. Different differentials may apply for different deferred periods.
5. It is not possible to draw conclusions from the information in this bulletin about the individual consumer’s premium rate. This is due to a number reasons, including:
   • The data included in this bulletin is an industry average of German data whereas insurance companies may reflect their own data in their pricing.
   • Insurance companies will take account of factors other than age and gender when calculating premiums. For example, these may include their expenses and investment returns.
   • Insurance companies will also take account of specific features for the policies they offer, such as escalation.

Indeed the Treasury’s guidance states: ‘ This data must demonstrate the case for differing treatment based on gender, but it is highly unlikely to present a direct correlation with the premiums charged or the benefit obtained in individual cases.’

Premium rates depend on differentials by age throughout the term of the policy, not just the age at the start. If you wish to obtain more details on how the premium for a particular policy reflects gender differentials in the underlying data, please contact Partnership.