The Cost of Income Protection Insurance in 2017 – Men vs Women

31 August 2017
Who pays more for income protection insurance – men or women? Canstar Research has crunched the numbers to find out.

For many types of insurance, you’ll find that premiums for men and women can often be vastly different. Car insurance, for example, is more expensive for men, since men are involved in more accidents and incidents involving reckless driving.

It’s the other way around for women when it comes to income protection insurance. Through our research in life insurance this year, Canstar has identified that there is a somewhat significant difference between what women pay for income protection insurance and what men pay.

What is income protection insurance?

With income protection insurance, your insurer provides you with a monthly benefit if you are unable to work for a period of time due to an illness or injury. It replaces the income you would have lost or stand to lose through this inability to work, giving you and your family peace of mind. It is especially important for small business owners or the self-employed, whose livelihood relies solely on their ability to work.

Although each income protection policy has its own range of benefits and coverage, a standard policy should cover you for up to 75% of your gross wages for a maximum time period. To find an estimate of how much cover you can apply for, use our Income Protection Insurance Calculator.

You should also be sure you know the difference between  Income Protection Insurance and the various other types of insurance.

See the comparison table below that features direct life insurance policies available for a 30-39 year old non-smoking female who works in a professional occupation. This table has been sorted by Star Rating (highest first) and features links direct to the providers website.

Cost of income protection – men vs women

To represent the difference in premiums between the sexes, Canstar has prepared the graphic below based on stepped monthly premiums covering 75% of a $70,000 annual salary.

You can see in this graphic that, on average, women pay around $45 more per month for an income protection policy, up from a $43 difference in 2016. Overall, it seems that women’s premiums are increasing at a faster rate – they have increased by 5.9% since this time last year, compared to a 5.4% increase for men.

This is not a new development. Historically, women have always paid more than men on average when it comes to income protection insurance. But why is this?

Why do women pay more than men?

Women pay less than men for certain insurances – think car and life insurance but for income protection, the opposite is the case. However, there are various historical trends that have caused this.

One of the main reasons females are charged more than males for income protection is that women tend to make more income protection claims than men. While men can generally only make claims if they are injured in an accident or are struck ill, women can also file for claims for maternity-related reasons, which significantly increases the number of claims being made.

Various studies have also concluded that when they do claim, women tend to take more time off than men, resulting in more money out of the insurer’s pocket. This has been the case for some time, with a study from 1997 by The Institute of Actuaries of Australia showing the average claim duration for men and women was:

  • 158 days for women
  • 118 days for men

There are several other factors that contribute to higher premiums for women. Such factors include female cancers being more likely to strike earlier in life than in men.

Insurance is a ‘pool’ arrangement. It doesn’t matter if none of these things affect you personally, the rest of the people in your profile all contribute to rising and falling premiums.

For the time being, there is no real way for women in Australia to find cheaper income protection insurance premiums compared to men of the same age. That makes it all the more important to find a policy with the most effective combination of price and features available. Canstar can help with that:

Income protection premiums rise across the industry

The above example shows roughly a 5% rise in Income Protection premiums industry-wide in 2017, assuming the policy is for 30-year-old men and women on a $70,000 salary.

According to Risk Info, numerous insurers have reported increasing their income protection premiums, claiming it would be financially unviable to leave them at their current levels back in 2016.

In September 2016, ClearView, one of this year’s winning Life Insurance providers, claimed the life insurance industry had consistently lost money on income protection insurance for the last 10 years, and it had lost $381 million for the year ending June 2016.

“This is neither sustainable nor is it equitable to subsidise income protection losses from other business segments. As a result, most life insurers have been increasing their income protection rates over the last 18 months,” ClearView stated.

Likewise, AMP announced $18 million of its $44 million losses in the third quarter of 2016 was due to retail income protection.

Unfortunately for the consumer, insurers are counteracting these losses by increasing their income protection premiums.

While your choice of life insurance policy shouldn’t be solely price driven, it does play a large part. These rising premiums across the industry make it more important to do your homework and find an income protection policy that can provide you with an adequate level of cover for the amount you’re able to spend.

To get help finding a policy that suits your needs, you can use Canstar’s Income Protection Insurance Calculator and our comparison tables below:

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