The Test-Achats Judgment: impacts for Life Insurance Sector

MIB – School of Management 3 INTRODUCTION 21.12.2012: one date, one prophecy, the end of world for the umpteenth time. If you are reading these lines actually our old earth is still spinning as usual (and I am pretty confident about this 1 ). But, no matter if you are believers or not in apocalyptical scenarios, that date for sure will bring a change somewhere in the world. This change will take place in the field of financial services, in particular in the world of insurance, pushing to an end a consolidate way to price many kind of contracts. Indeed, in the whole European Union, it will not be possible to price insurance policies differently for men and women, in both life and non-life sector. The last and definitive step toward this ending has been the so-called “Test-Achats Judgment” in March 2011, a ruling that set up to 21.12.2012 the deadline for pricing those products as it was in the past. But the whole process actually started long before. In the first Chapter of this short paper the phases that led to this ruling are explained, along with the analysis of the sentence itself. The main reasons of this new unisex pricing will be explained underlying why this change has to be made. In the second Chapter it will be reported a summary of possible impacts and consequences for life sector coming from different good authorities, getting little bit more in depth for the possible evolution of two products: term life insurance and annuities. Last but not least, in Chapter 3 it will be brought to the reader’s attention a practical example on how the Test- Achats ruling has been faced by one of the most important insurance company for its array of annuity products. Then, all the ties born in these Chapters will be gathered together in the conclusion Chapter, in particular giving an answer to the main question arising since the idea of a possible gender banning for pricing insurance policies started to circulate: is this ruling actually something fair? For answering to this question it will be shown in Chapter 2 in which way mortality is related to gender and if it is possible to find other kind of variables able to express the mortality expectations in the same way (or even better). Then all these reasoning will find a little bit more technical application in Chapter 3, looking at the annuities on an actuarial perspective. For the most part of this paper I tried to keep the writing as simple as possible in order to be comprehensible also for those who could not have strong knowledge in insurance field, but for Chapter 3 some technical skills are required. Anyway I provided some hints and references on the most important actuarial tools and methodologies used in the Chapter so that actually also this part should be as accessible as the others. All the elaborations, unless where noted, were made 1 This thesis has been completed couple of days before December , the 21 st , 2012