Come the end of 2012, things are set to change in the world of insurance. In March of this year, the insurance industry lost its ability to opt out of the 2004 EU Gender Directive – and, as a member of the EU, the UK is now obliged to fall into line.

This change is substantial and it will affect you. In fact, it’s probably going to be the most significant insurance industry change since its inception back in the 14th century. Us ordinary folk who have car insurance, life insurance, income protection and hopefully an annuity are all set to be affected by this Directive. But what exactly does this mean for you?

The UK insurance market has long been regarded as a market that is fairly efficient at pricing risk. Unlike the banking sector, there are no obvious blips on the historical timeline to suggest that the industry has ever got its maths wrong. 

The industry plays custodian to a vast amount of data that has revealed some interesting facts:

• Men get ill less than women. Currently, income protection insurance and health insurance is cheaper for men, and they are offered a higher income on their annuities.
• Women live longer than men. Currently, life insurance is cheaper for women than for men. 
• Women are less inclined to be involved in car accidents than men. This is why they enjoy cheaper car insurance.

These are concepts that society identifies with; it’s reassuring to many, to know that they’re paying for the risk of “their” risk pool and not others’. However, this is all going to change. 

By the end of 2012, the UK insurer will not be able to consider gender as a criterion when pricing the risk of the insured event. In order to cope with this degree of sea change, the industry is likely to approach this new pricing world with caution. Current estimates suggest that the industry will shore up around £1bn in capital to provide protection against the uncertainties of this new market reality. This “capital cost” will find its way to our insurance premiums - and this after a year where we saw inflation at 5%, plus sharp rises in car and household insurance premiums.

The new pricing should start to filter through toward the end of 2012. Now is a good time to sit down with your adviser and review your insurance requirements before the new pricing hits. Think of 2012 as the insurance industry’s “stock clearance sale” - make sure not to miss the chance to update and review while stocks last.