unisex annuity rate

Discussion in 'SA2' started by kntg24, Jan 5, 2019.

  1. kntg24

    kntg24 Member

    In Chapter 5 Practice Questions,
    "Describe the risks that arise from the introduction of legislation that prevents insurers from pricing immediate annuity business by gender. "

    One of the points stated that averaged annuity rate will appear relatively more attractive to males than to females.

    However, it is previously stated that annuity rates priced on a gender-specific basis would be lower for women. So, after averaging out, shouldn't women be more attracted to the annuity and less attractive to men since their annuity rate is worsened than before?

    Please help as this really confuse me.

  2. Em Francis

    Em Francis ActEd Tutor Staff Member

    Yes, you are right, the averaged annuity rate will appear relatively more attractive to females than to males following the introduction of the legislation.
    Apologies for this.
    Thank you for your thread.

  3. student2012

    student2012 Keen member

    Shouldn't the annuity rates be more attractive to men? Life expectancy for males are lower than that of females, hence averaged annuity rates would mean women could not get higher rates because they are expected to live longer. On the similar lines, hence, males would benefit from getting better rates on a gender-neuter pricing. Am I missing something?
  4. mugono

    mugono Ton up Member

    You have it the wrong way wrong. See Em’s response. Annuities pay out on survival. If average mortality increases, the insurer expects to make fewer annuity payments. They can therefore afford to increase the annuity payments / rates without compromising profit margins. Annuity payments / rates would need to reduce if life expectancy increased without compromising profit margins.
    Last edited: Jan 14, 2019
  5. student2012

    student2012 Keen member

    Yes, my bad. Thanks.

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