Q80 Do you have any comments on the likely impact of the Gender Directive’s insurance provisions on providers and/or customers of insurance and related financial products?

6.1 The Gender Directive’s insurance provisions will significantly impact on travel insurance providers in the following ways:

6.2 Travel insurers will no longer be able to charge a higher premium in respect of pregnancy-related illnesses or restrict policy benefits dependent on the stage of pregnancy. They will also have to pay claims, potentially of high value, which would previously have been excluded, such as a premature baby born outside of the terms and conditions of the policy. Therefore, for insurers to cover the costs of these new claim risks, the price of travel insurance is likely to increase.

6.3 The new risks that travel insurers face as a result of the Directive include:
• Women travelling to expensive destinations to give birth to their child(ren) and expecting their travel insurance provider to cover the costs. These costs will be significantly larger if there are complications in the delivery;
• Paying out large claims relating to premature births that would have otherwise been excluded (for example, these cost approximately £500k - £1million in the USA);
• Covering the cost of routine pregnancy/obstetric treatment which is currently excluded because it is non-emergency medical treatment and thus not covered by a travel policy;
• Backpacker policies (typically covering 365 days overseas) could now see a woman fall pregnant overseas and want to have her child abroad as opposed to returning home to the UK and the NHS. Previously the cost of this delivery would have been excluded on the policy.

6.4 As a result of the increased risks and higher claims involved, some travel insurance companies may request notification of a pregnancy and for the unborn baby to be included on the policy with an additional premium paid. Without this, the insurer would only pay the percentage costs relating to the mother and her medical care whilst giving birth, and decline the claim for the baby on the grounds that it is not an insured person because it is not listed on the policy. The medical care for a new born baby can carry the greatest costs. For example, a 26-week-old premature baby born in the USA will stay in the Intensive Care Unit for twelve weeks at £10,000 a day until an air ambulance can transport it back to the UK, typically at a cost of approximately £35,000.

6.5 Insurers are required to rewrite policy documentation in order to comply with the Directive. Travel insurance covers fortuitous emergency events overseas and does not cover ‘expected’ costs. Therefore, in relation to the prohibition of different treatment as a result of pregnancy and maternity, travel insurance policies will need to be reworded to ensure that insurers are not liable for costs of a childbirth delivery which is ‘to term’ (defined as 37 out of 40 weeks).

Q81 Should the ban on differences due to maternity or pregnancy costs be implemented in December 2007 or deferred until December 2009?

7.1 The deferral of the ban on pregnancy or maternity costs to December 2009 is essential for the travel insurance industry to practically implement the required changes to comply with the Directive. RBS Insurance, along with the rest of the travel insurance industry, needs the extended timeframe to ensure that our internal systems are adjusted and policy wording is compliant, as well as meeting the reprinting deadlines and clarifying the exact legal implications of the Directive.


7.2 The prohibition should be delayed for the following reasons:

7.3 The rewriting of our policy wording to comply with the Directive will require both underwriting and legal analysis. The time required to redefine our policies will be longer than the few months available to the end of 2007 because it will have to include an assessment of the impact on our business.

7.4 The prohibition on differences relating to pregnancy and maternity will inevitably mean that we will pay claims that were previously excluded. A greater amount of time is needed to assess the increased risks that this will expose us to and the extent to which it will affect premiums.

7.5 The industry remains unclear about the exact legal implications of the legislation. RBS Insurance has obtained a QC’s opinion but there remain uncertainties, and we need the extra time to clarify its intent and meaning for our business.

7.6 Each RBS Insurance scheme will have to reprint their policy documentation. The time that will be available between the Government’s response to this consultation and the 21 December 2007 implementation date is not long enough of us to have reprinted all of our documentation, ready for distribution. Reprinting will be dependent on finalisation of new policy wording, as described above.

7.7 Our internal IT systems will need to be altered to reflect the changes. The timescale required for this is approximately nine to twelve months. If the ban is introduced at the end of 2007, we will struggle to make the system changes in the time available.

7.8 The costs involved in reprinting documentation and changing IT systems are significant. For example, there are approximately 2.1 million annual travel insurance customers across RBS Insurance. To reprint and resend documentation to all RBS Insurance customers, it will cost approximately £3 million. The deferral will allow us to budget properly for these costs. When the Directive was transposed, it was indicated that the introduction of the ban on pregnancy/maternity costs would be deferred until December 2009. Therefore, RBS Insurance has not included its implementation in its business/budget plans for 2007.

7.9 As outlined above, the travel insurance industry requires a significantly longer notification period than the few months available to December 2007 to make these alterations. We would be in a better position to implement the changes in December 2008 rather than the end of 2007.