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March 07, 2022

Will unisex pricing soon hit the annuity market?

Last week in this space we talked about the European Court of Justice ruling that insurance companies must stop charging different rates for women and men by the end of next year.

RetireCanada allows insurers to take gender into account when pricing life-insurance products, though the rules for auto insurance vary across the country.

But, it’s not just insurance rates that might be affected. In fact, the unintended consequences of this judgement are already starting to emerge as older EU consumers try to determine what these changes might mean for them.

Men coming up to retirement, for instance, may consider moving their after-work plans up a bit to get a better annuity deal before the lower unisex rates are introduced.

Actuary Stephen Richard points out that large employers' defined benefit pension schemes are free to either self-insure members’ pensions or buy annuities for their pensioners. And many schemes actually do both, he explains to Citywire.

“If a unisex annuity rate is cheaper than the female rate, then pension schemes could selectively buy out female pensioners,” he warns.

This would distort the annuity market as there would be many more women buying annuities and many fewer men.

“Insurers will be only too well aware of this, and will price accordingly. The safest price for them to charge is one based on female rates,” he says.

Critics worry that life companies will play it safe and simply rework the most conservative unisex rates with the result that they will therefore likely be the largest, and perhaps only, beneficiaries of this change.

A few weeks ago, Canada Life decided to pull a guarantee period on its annuity quotes out of fears related to these gender-based pricing issues. And it appears they were quite prescient. It now looks like pension pricing is something else to watch for as these potential changes ripple through the Canadian marketplace.

Do you expect a significant shift in annuity pricing along these lines? Will you try to take advantage of it?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...