Last week the NZ Herald ran an article entitled “Why women pay double for income protection insurance” then followed up with “Women ‘have grounds’ to fight high premiums”. Git outa here! What nonsense is this?
Let’s start with… what is Income Protection Insurance?
Income Protection insurance pays out when the policyholder is unable to work, either through illness, injury or redundancy, depending on the terms of the policy. It’s typically a very complex product with a ton of small print around the conditions under which your claim will be paid; such as how long you must wait before you're paid, calculating the amount you'll be paid and for how long you’ll continue being paid… if indeed you’re lucky enough to be paid at all. (And for the record, this is why we at Pinnacle Lifedon't offer this type of product - we prefer to keep things simple.)
So what’s the fuss about?
The fuss is about the fact that female premiums are significantly higher for this product than male premiums, and that this constitutes some kind of unfair practice. Also, because premiums for women are so high, many women can’t afford the product.
Is this fair?
Totally. It has absolutely nothing to do with gender discrimination. The reality is this; claims by women on this product exceed claims by men by some large margin. And so insurance companies are obliged to charge women more. It's simple math.
Is there something we can do about this?
Of course... we could have a different approach. We could combine all the claims by men and women and work out an average and charge men and women the same for Income Protection.
But… then we’d need to look at many other insurance products and do the same thing. For instance, men pay more than women for life insurance. So let’s work out an average so we all pay the same. Wait a minute… men pay more for their accident insurance and funeral insurance. Why not make the premiums for these products the same too? And hey... what about smokers and non-smokers paying the same premiums for health insurance… it's brilliant!
On the other hand, maybe we can just get real and accept the fact that people are all, well… different.