Insurance has long been split on the gender issue – not whether they can use gender to determine rates, but if men should be charged more than women or vice-versa. The ethical question, however, has been debated by governments recently, leading to several industry regulations changes that now restrict the use of gender statistics in determining insurance prices.
The Case Against Gender Rating
Gender rating, as it is known in the insurance industry, is the practice of using statistical analysis to assess risk based on gender and then to charge for insurance accordingly.
Traditionally, this has led to higher prices in health insurance for women as compared to men, and lower auto insurance premiums for women as compared to men.
Health insurance, and to a large degree auto insurance also, is largely determined by two statistical categories: age and gender.
While long practiced, people outside the industry have been critical for decades of this practice that they argue is sexist, archaic, and ineffective.
One activist argued that, “how effective this is doesn’t really matter. The fact is, whether gender rating benefits men or women, it is unethical. It sets a bad standard for the way we do things in this country, where there are few women CEOs and women make far less money than men doing the same jobs.”
“The statistics are pretty prosaic and don’t seem to back up the rates,” a former insurance actuary said, adding, “there are far more effective ways to determine rates.” Industry-hired actuaries dispute this claim.
California Regulators Ban Gendered Pricing for Health Insurance
In 2010, activists struck a big blow by pushing the state legislature to pass a law that prevents health insurance companies from factoring in gender when determining health insurance rates. The efforts were aided by large national reform on an industry that many feel discriminates unfairly and fails to protect consumers, since they are motivated entirely by profits.
The new law takes effect far before the date a federal ban will come into effect: 2014. Women should see there health insurance rates come down by as much as 30% at this time, as has been observed in California.
Car Insurance Gender Rating Ban to Follow?
Women are generally considered to be less of a driving risk to auto insurance companies, and generally receive cheaper premiums as a result. Still, there are female activists joining with men to call for a similar ban on the car insurance industry’s gender bias. While there is less motivation due to the lower costs already, protesters have been boosted by a decision in the European Union to ban gendered pricing in health insurance and a decision pending on auto insurance.
Analysts have argued that there will not be sufficient motivation to push new regulation through on a national level. While California may go its own way, as she often does, the United States will likely not be ahead of the curve on this one. That’s because of the impact a ban would have.
Сar insurance prices for women will likely go up, while prices for men will only drop slightly if at all due to other risks tied to the Y-chromosome bearing sex.