Why women get discounts on term life insurance


By Deepak Yohannan
The gender gap in India may be closing gradually, but we still inhabit an unequal world. In the professional sphere, men continue to be the dominating force, hogging corporate boards and receiving higher pay than their equally efficient female counterparts. Even in 2013, men seem to have the advantage – but not everywhere. In the world of life insurance, women have the upper hand.
The insurance sector in the European Union underwent a massive shift in December last year, when it was declared that women would no longer enjoy preferential rates in insurance. However, that trend is yet catch up in India and other parts of the world. Indian women still get discounted rates on various kinds of insurance, including term life insurance. This is likely to continue until a much larger proportion of women enter the insurance net.
Do women really get discounts?
Let us take the example of two non-smokers – a man and a woman – who are seeking a suitable term life insurance plan. Both these individuals are 28 years old, have the same life insurance requirements and plan to pay their insurance premiums annually. Both are looking at a maximum coverage of Rs 20 lakh and from the same insurer. In fact, there is no difference between the two individuals except their gender.
Yet, the man ends up paying a premium of Rs 3,258 on a term life insurance plan with a 10-year duration while the woman pays on Rs 2,924 on the same policy over the same period. Thus, she saves about 10.3 percent simply because of her gender.
Let us take this up a notch and look at the 30-year plans. Under this scenario, the man ends up paying Rs 4,494 as premium per annum while the woman pays only Rs 3,861. Her savings percentage (about 14.1 per cent) is now considerably higher than in the 10-year scenario.
Why do women get discounts?
Given that women are still a largely untapped market in the insurance sector, one might think that the lowered rates are a way to persuade women – both professional women and homemakers – to purchase life insurance. While many around the world shout about gender discrimination, insurance companies around the world quote statistics to show that they provide discounted rates to women for good reason.
One of the primary reasons why women get to enjoy discounted rates on term life policies is because statistics show that they outlive men by an average of five years. Why does this matter to insurance companies? Remember, the insurer is liable to pay out death benefits if the insured dies within the term of the policy. If a policyholder lives longer, the insurer is paid additional premiums that help reduce the latter’s financial burden. Since women live longer, the insurer has a higher likelihood of profiting on the policy, even with the lowered premiums.
Another related factor is that women tend to make healthier lifestyle choices. More women than men are non-smokers and safe drivers. Moreover, while men tend to develop cardiovascular and other diseases in their 50s and 60s, women tend to do so after their 70s.
The equation is really quite simple: insurers like policyholders who live longer. Since women outlive men, the discounts naturally go to them.
(The author is the CEO of MyInsuranceClub.com, an online insurance price and features comparison portal. You may contact him directly on Twitter: @dyohannan)


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