Health insurance has seen a decent growth in the last decade in India. Considering various factors about future uncertainties and high healthcare inflation it is now considered important by an average Indian family and more and more people are opting for health insurance products.
Insurance being a financial tool, its increasing awareness and demand have raised the curiosity level among the customers and have led even common people to question more about the product construct, pricing parameters and different related factors may be technical or non-technical.
One question that frequently comes amongst others is that why insurers have separate premium structure for different gender and in this age where every person is talking and promoting gender equality why do insurers have a gender based medical insurance premium. Some consider this biased attitude, unfair and even non-sense.
The purpose of this article is to give an answer to this very common question.
First, we need to understand that it is not only about gender but there are many other factors like age, pre-existing medical conditions, family medical history, lifestyle and even city of residence among others that may have an impact over the health insurance premium we pay.
Risk based pricing is the best, most fair and genuine way of establishing insurance premiums and gender-based pricing is only adopted for insurance products in which it helps to price the products on based on gender specific risk differential. Some other insurance products may be life insurance and pension plans where we may see a gender-based pricing approach.
Many of us will be surprised to know that in some countries there is a gender specific rating structure for motor insurance as well. Insurers in India come up with separate premium charts in health insurance for male and female in which premiums are distributed for different age groups.
Other factors like medical condition, family history and lifestyle can come up while medical underwriting of a specific proposal. We below give some points for the reader to understand well that what is the logic behind keeping a different premium for men and women as far as health insurance is concerned.
- Life expectancy: In India the average life expectancy of men is around 64.7 whereas for women the figure is 68.2. Which means that women tend to live a bit higher than men. Although the life expectancy factor for pricing insurance products has more relevance in life insurance like term life which has a direct relation with mortality tables, health insurance products also account for the same while fixing premiums.
- Maternity: Premiums for health products with maternity benefits will be higher as this is more like of a benefit and less like a fortuitous event covered by insurance. Let us consider a hypothetical situation that a young married male and a married female of same age separately goes to purchase individual health insurance for self. All other risk factors being similar the insurance will be costlier for the female just because the insurer has a maternity benefit to cover which is like a sure shot cost and that too pretty high. During pregnancy a long list of medical procedure, tests and sonography is to be conducted which if covered in the policy needs to be paid by the insurer either full or partial. There are also other associated costs like pre- and post-natal costs, new born baby cover, vaccination costs etc. which raises the cost for the insurance company. Not only maternity cost which the insurer has to pay during this period of nine months and hospitalization but the procedure itself is a life changing one which has a significant impact on women’s health and may lead to future complications. This is also one of a good reason to keep the premium gender specific.
- Lifestyle: Men and women have different lifestyle. Bad lifestyle habits like smoking and drinking are often more associated with men although some women are also habituated with the same. These habits in conjunction with others like less physical activity and exercises can lead to cardiovascular diseases at older age, which have been seen more prominent in men than women. Insurers need to account for these factors while pricing the product. Not only that, there are other factors as well like preventive maintenance, diet habits etc. which may have an impact on premium.
- Accident Risks: Men are considered to be more risky drivers than women. Thus, health insurance policies that cover personal accident as an additional cover account for this fact. We have already mentioned that there is a prevalent practice of charging gender specific premium for motor insurance by applying the same logic in many insurance markets like UK. More risky behaviour of men while driving may lead to more accidents and disabilities and thus increasing the claim cost for insurer.
- Different set of illnesses: Men and women have some specific diseases especially cancers like women are susceptible to breast and ovarian cancer and men are exposed to prostate cancer. These factors obviously need to be heeded by the insurer while setting premium especially in the health insurance products that cover critical illnesses as an additional cover.
Inspite of the factors mentioned above there are still many people who favour the abolishing of gender based premium but charging a same flat premium for men and women in different age groups may have its own consequences and effects which will be discussion point in a separate article.