2.2 Insurance firms – addressing gender issues
In Week 1 we saw how insurance business is split between general (annual) insurance and long-term insurance. Most of the large UK insurance firms are ‘composites’ – active in both types of insurance business. However, some firms do specialise in just one of the two areas of insurance business. If active in both areas, firms must manage and report on the two business areas separately to demonstrate that there is no cross-funding of the two very different types of business.
Table 3 shows the largest UK insurance firms on the basis of their market capitalisation. The table only shows those firms whose core business is insurance, and so excludes the UK banks who own insurance subsidiaries.
Table 3 Insurance firms and their market capitalisation
|Legal & General||£15bn|
|Royal & Sun Alliance||£5bn|
In addition to conducting insurance business, many insurance firms have taken on a role as investment intermediaries – i.e. investment business not linked to insurance. This diversification has sprung from their life assurance business, where policies either pay out to the beneficiaries of policyholders in the event of death, or on maturity pay out to the policyholder.
The insurance sector, as with the building society sector, has seen the conversion of mutuals to plcs in recent years – with Standard Life and Norwich Union (now Aviva) being two major recent converters. The industry is now dominated by plc providers, with only a few mutuals remaining.
A decision by the European Court of Justice meant that from December 2012 insurance firms in Europe could no longer take gender into account when pricing their insurance products. This move has had a major impact on the insurance industry.
Who do you think have been the gender winners and losers from this decision? In particular, think about car insurance and life insurance.
Women are losers when it comes to both car and life insurance – in both respects they are a lower risk than men and this should, with risk-based pricing, make insurance cheaper for women. By contrast men are losing out through the removal of the gender differential on annuities. Men used to get higher annuities due to lower average life-span – women got lower annuities due to longer average life-span. The differential has now been removed – although in recent years the average life-span gap between men and women has been narrowing.