Universally, life insurance can be said to be one of the most important security covers that, upon the death of the assurer, protects family continuity from the grim realities of debt. However, it is also a well-known fact that life insurance does not treat everyone at the same platform and disparities do come up on a number of factors, one of them being gender. Life insurance also appears to be gendered since it is a law requirement for insurance companies to set a standard risk and premium cover which differ from either gender. But why is this the case, and what factors contribute to these differences?
In this blog, a number of the issues of gender gaps in life insurance and particularly the assessment of men and women in relation to the level of risks, the reasons for this gender imbalance and its effects on the insured will be covered. The most crucial part, in our opinion, is the explanation as to why these differences exist. But this is not the end of the world because other important issues, human issues, should be resolved as well.
Understanding the Basics of Life Insurance Risk Assessment
Once we understand gender as an aspect in the risk representation of life insurance, let us first look into the concept of risk itself. Life underwriting is the term that insurers use to review in detail the risk associated with any given applicant number and the premium figure which will be given to that applicant. A number of factors are taken into consideration in this respect, including:
- Age
- Health status and medical history
- Occupation
- Lifestyle habits (such as smoking, alcohol consumption, and exercise)
- Family medical history
- Gender
The purpose of this practice is to determine the probability of the insured person dying before the expiry date of the policy. The greater the rick perceived the greater will the premiums be. However, factors such as life span and other health related threats amongst men and women causes this practice to not be uniformly applied amongst differently in this process.
Life Expectancy: The Core of Gender-Based Differences
One of the main justifications for why life insurance companies have different premiums for men and women is the differences in expected lifespans. Statistically, women are likely to survive longer than men. As reported by territories served by the World Health Organization, on average, women live approximately between 5 and 7 years longer than men. In the United States, the life expectancy for women stands at around eighty-one years. On the other hand, a seventy-six year life expectancy is recorded for men according to the Center for Disease Control and Prevention (CDC).
These variances in life expectancy are essential to insurance underwriting and all life insurance firms. Since there is a tendency to live longer for women, they tend to be considered lower risk over the period of the policy, and this is often reflected in the premiums that women are charged compared to men of similar age and health status. On the other hand, the likelihood of men dying earlier than their counterparts means that they are charged higher risk premiums on the policies.
After all, life expectancy is not even half the story. There are other factors such as health risks, and lifestyle factors affected by gender that also contribute to evaluating risk by life insurance companies.
Health Risks: How Men and Women Differ
Apart from life expectancy, there are factors of health that vary amongst men and women to such an extent that these are even considered by insurance companies while determining the risk factor. Though men usually may be subjected to higher premiums, nonetheless both genders considers peculiar health risks that determine their insurance cover in life insurance.
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Men and Higher Risk Factors
Men are statistically more likely to engage in high-risk behaviors, such as smoking, excessive alcohol consumption, and dangerous driving, all of which can increase mortality rates. Men are also more prone to certain health conditions that life insurers pay attention to, including:
- Heart disease: According to the CDC, heart disease is the leading cause of death for men, and they are more likely to experience it earlier in life compared to women.
- Accidents and injuries: Men are more likely to be involved in fatal accidents, including car crashes, workplace incidents, and risky recreational activities like extreme sports.
- Violence: Men are statistically more likely to be victims of violent crime or homicide, which is factored into life insurance risk assessments.
These factors contribute to the perception of men as higher-risk applicants, which is reflected in their higher premiums.
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Women and Specific Health Concerns
While women generally face lower premiums due to longer life expectancy, they are not immune to certain health risks. Some health concerns that are more prevalent among women include:
- Breast cancer: Women are at a significantly higher risk of developing breast cancer compared to men. Although modern treatments have improved survival rates, the presence of a cancer diagnosis can impact life insurance premiums.
- Pregnancy and childbirth: Although pregnancy is a natural part of life, complications during pregnancy or childbirth can present health risks for women, which life insurers may take into account when assessing risk.
- Autoimmune disorders: Women are more likely to develop autoimmune diseases, such as lupus and multiple sclerosis, which can affect life expectancy and overall health.
Despite these risks, women generally benefit from lower premiums because their overall risk of death is still lower than men’s across the lifespan.
Occupational and Lifestyle Differences
Occupation and Lifestyle Differences are one of the other reason gender differences in life insurance underwriting occur. In the past, more men have anyway worked in physically demanding or potentially dangerous industries like construction and mining. Life insurers may charge increased premiums for coverage based on the fact that these jobs more often involve accidents or injuries in the workplace.
Conversely, women tend to work in office environments or lower-risk jobs historically; allowing for less life insurance premiums. Yet with women entering male professions more every day these occupational differences are becoming less and the insurance world is reflecting that change in their risk models.
Moreover, underwriting decisions also take into account lifestyle choices like exercise habits, diet and smoking. Men are also statistically more likely to smoke or drink heavily, both of which raise mortality and consequently life insurance premiums.
The Ethical Debate: Should Gender Be a Factor in Risk Assessment?
Over the years, an ethical issue has surfaced in life insurance, and this is the issue of using gender in its underwriting processes. The labeling of arbitrary gender pricing as discrimination is common, especially since it endorses the routinely disseminated ideas regarding the health and behaviors of males and females. Gender price discrimination has, however, been outlawed in certain regions.
For instance, the ruling by European Court of Justice in 2012 on Test-Achats determined that gender is not an acceptable judgement for insurance pricing. That ruling meant the end of gender-specific rates in all European Union life, car and shop insurances. The focal argument of this ruling is that individuals should be treated equally with respect to their insurance apart from their gender.
Nevertheless, it is not the case in many countries such as the United States where gender-based pricing, or gender, for that matter, is commonplace in life insurers. They suggest that prices based on gender discrimination are based on actual facts regarding statistics and enable insurers to price the policies enhanced according to risk. Under this viewpoint, associating gender with risk assessment is no more controversial than associating it with factors such as age, current health status, or occupation.
Moving Toward More Individualized Underwriting
Although gender-based risk assessment is dominant nowadays, there’s a shift in life insurance towards the more individualized approach. There are many developments including artificial intelligence (AI) and data analytics that enable insurers to assess risk considering more factors than before such as, behavioral patterns, genetic information, and health parameters.
For instance, a couple of life insurance providers already use wearable devices to measure physical activities, heart rate, and sleep, among other things. Insured people who are physically active or who sleep well can be charged lower premiums even if the insured person’s gender is not considered. This trend towards data-driven underwriting may decrease the focus on gender as a risk factor in the underwriting process ensuring that the individuals are more accurately and fairly priced.
Conclusion
Women tend to be less of a risk than men to insure as they live longer and have statistically lesser health risks. Women are generally charged lower life insurance premiums since they live longer compared to men who have been shown to be more inclined towards risky behaviors and face a greater risk of some diseases.
As the insurance market continues to change, there is increased awareness of the problems related to discrimination. Gender discrimination is likely to diminish in the near future as more factors in setting premiums become the focus and discrimination by sex becomes less important. Discrimination-free insurance pricing is likely more objective and fairer. However, the moral side of this problem should also be taken into account so that the insurance does not become discriminatory and is available to all people.
