Until a few years ago, the income tax slab rates for men and women were different; the basic exemption limit for women was slightly higher. Even now, many states charge a lower stamp duty rate from women if a property is being registered in their names. While these were social welfare moves by the government, financial institutions also price some products differently for women. Some of these benefit women but others don’t, as the pricing is based on their risk perception in terms of life expectancy, health parameters and attitude towards money.
We tell you how banks and insurance companies perceive women in terms of risk and how that affects the pricing of their products for them.
Lending rates
Typically, there is no difference in criteria, when it comes to evaluating the loan eligibility of a man or a woman borrower. “For all loan applications, irrespective of the gender, lenders consider income, credit score, age, job profile, employer and location of the applicant," said Radhika Binani, chief product officer, Paisabazaar.com, an online marketplace for loans and credit cards.
However, lenders charge a lower interest rate from women for certain types of loans. “Some lenders charge lower rates on home loans, car loans and education loans to women borrowers or those with female co-applicants primarily for two reasons. First, it helps in increasing the financial empowerment of women. Second, lenders usually consider women to be more reliable when it comes to repaying loans and find them better at managing money. Hence, a woman as a loan’s primary applicant or co-applicant reduces the credit risk for the lender," said Binani.
For instance, in case of a home loan, State Bank of India offers a concession of 5 basis points (bps) in home loan rates to women borrowers. One bps is one-hundredth of a percentage point. Similarly, Canara Bank offers 0.50% concession in the rate of interest for girl students in the case of education loan.
Insurance premiums
There are various factors that insurance companies consider before issuing you a policy. “Insurance companies work on risk-based pricing, which assesses the insured for morbidity risk, mortality risk and/or accidents," said Shreeraj Deshpande, chief operating officer, Future Generali India Insurance Co. Ltd.
Given that these factors vary for men and women, the premium rates are also different for them. For instance, for a 36-year-old non-smoker male, ICICI Prudential Life Insurance Co. Ltd is offering a term insurance of ₹1 crore for the next 40 years at a premium of ₹15,983 per annum; with other things remaining constant, a woman will have to pay ₹13,943 per annum, 12.76% lower than a man, for the same policy. This is because the life expectancy figure is higher for women.
While longer life expectancy brings down the premium for women in case of life insurance, it adversely impacts the premium for a health insurance policy. “Women tend to live longer than men, according to the latest statistics available, the life expectancy for women in India is 70.4 years, while for men it is 67.8 years. This means that women require healthcare for a longer period of time than men," said Subramanyam Brahmajoysula, head, underwriting and reinsurance, SBI General Insurance.
“Research has also shown that women tend to have more chronic conditions and tend to visit doctors more frequently. Reproductive health-related claims, including maternity claims, would need to be factored in while deciding the health insurance premiums," added Brahmajoysula. This is why some health insurance companies have a higher premium for women compared to men.
When it comes to critical insurance policies that cover life-threatening critical illnesses such as cancer, stroke and heart attack, the premiums are even higher for women. “Apart from the reasons mentioned before, it needs to be noted that critical illnesses policies cover cancer and two forms of it (breast and cervical cancer) solely impact women. Incidents of mortality due to breast and cervical cancer in India are among the highest in the world. This has a direct impact on the premiums for critical illness policies," said Brahmajoysula.
As a result there is a huge difference between the premium charged for a critical insurance policy from men and women. For instance, HDFC ERGO General Insurance Co. offers a critical insurance policy (especially for cancer) with a sum insured of ₹50 lakh at a premium of ₹6,879 per annum to a non-smoker man aged between 36 and 40; all things remaining constant, for the same policy, a woman will have to pay ₹16,918 per annum, which is 146% more than the premium for a man.
Financial products assess women differently so be mindful of the fact.