Gender discrimination works in women’s favour when they take out insurance because, all else being equal, they pay lower premiums than men for vehicle and life cover. However, they are more under-insured than men when it comes to life cover.
Some countries have outlawed gender discrimination by insurers. From a business point of view, though, the issue is straightforward: what you pay for cover should depend on the level of risk you present to the insurer. The higher the risk, the more you will pay, because the probability the insurer will have to settle a claim from you is higher.
Vehicle insurance
Statistics gathered over the years in different countries show that women are responsible for fewer serious road accidents than men, bearing in mind that there are fewer women on the roads than men.
In the UK, a study by price comparison site Confused.com found that men were almost four times as likely to commit a motoring offence than women. More than 585 000 drivers in England and Wales were taken to court for breaking traffic laws in 2017, of which 79% were men. Men outnumbered women five to one when it came to drink-driving offences.
Here in South Africa, research by short-term insurer MiWay on road accidents by age and gender showed that younger women are better drivers than younger men. However this difference reverses over time: the research shows that older men are better drivers than older women.
Siyakha Masiye, spokesperson at MiWay, said the study found that younger women were in fewer accidents than men of the same age group. But he cautioned that although this may result in some female drivers paying lower premiums than men, many other factors are involved in determining premiums.
“While it is true that insurance companies take the factors of age and gender into account when calculating premiums, it is important to understand that these are just two of the many variables that influence insurance rates. Other factors, such as driving history (including accidents), vehicle type, location, and coverage options, also play a significant role in determining the cost of car insurance, and these will differ from person to person,” Masiye said.
Life insurance
Women also present a lower risk than men when it comes to individual life cover. Apart from gender, general risk factors taken into account are your age, whether you smoke or not, and your socio-economic status, determined by your education and income levels. Individual risk factors include your medical history, occupation and sporting activities.
Why do women pay less, which, depending on age, can be as much as 20% less, all else being equal?
As mentioned above, women indulge in fewer riskier activities than men, so are less likely to die in road accidents and other accidents. But the probability of women dying from natural causes is also lower than men, although this does vary with age. They also have a longer life expectancy than men, meaning that, on average, women live to a greater age than men do. According to Stats SA, the life expectancy at birth for the average South African man is 65.6 years and for the average South African woman it is 72.7 years – a difference of more than seven years.
Life insurance gap
The 2022 Asisa Life and Disability Insurance Gap Study, conducted every three years, showed that South Africa’s 14.3 million income earners had only enough life and disability insurance to cover 45% of the total insurance needs of their households. However, women earners fared worse than men in this regard.
Of the 14.3 million earners, 58% were men, whose average annual income was R235 922, and 42% were women, whose average income was R182 928.
- The average male earner needed life cover of about R1.9m, but had cover of only about R900 000, leaving an insurance gap of R1m, meaning that only 47% of the life insurance need was protected by actual cover.
- The average female earner needed life cover of about R1.7m, but had cover of only about R700 000, also leaving an insurance gap of R1m, but meaning that only 40% of the life insurance need was protected by actual cover.
Berniece Hieckmann, chief operating officer of Abacus Insurance, a division of Pepkor, said the industry needed to embrace purpose-led innovation that combined technological advancements with deep customer-centricity. This shift was crucial in addressing a major contributor to the insurance gap: widespread mistrust of the industry and a lack of consumer education.
“There was always this myth in the industry that insurance is sold and not bought. We need to be able to build truly buyable products,” she said. “I’m excited to see insurance becoming real, tangible, simple, and valuable for an average person.”
PERSONAL FINANCE