Since Montana’s unisex insurance law is back to the forefront this campaign season, perhaps it would be profitable to deal with some of the issues raised.
Some of you may not know that Montana law forbids insurance companies from charging women a different rate than men. Advocates for the law believe it is discriminatory to base insurance pricing on gender. And they are right. Every decision an insurance company makes is discrimination.
Unfortunately, the word “discrimination” has been redefined to be synonymous with “bigotry.” I suppose this is because the emotional content is useful as an opinion manipulator. Generic discrimination, however, is much more innocuous. Every choice is discriminatory. Since choice is informed by a variety of factors, some kinds of discrimination are correct and proper while other kinds may be bigoted and malevolent.
Someone recently suggested that “insurance discrimination” (that is, gender specific insurance pricing) is of the latter kind, and as a result insurance companies get more profit. This is incorrect. Insurance prices are determined by statistical analysis of losses, to which profit and overhead are added. That total does not change simply because it’s being allocated differently. In other words, the total dollar figure is the same, even though some customers pay less than others.
Insurance companies love to crunch numbers. They have found that certain kinds of attributes have poorer claims experience and therefore should priced higher. I think most of us would agree with this. We want insurance companies to discriminate. We expect them to. Those of us who drive carefully, or take good care of our houses or health, rightly believe we ought to be rewarded with lower insurance rates. People with health problems should pay more for their life and health insurance policies. Someone with a DUI or an accident should pay higher auto rates than a driver with a perfect record.
But despite the fact there are differences in loss experience for men and women, Montana law forbids the use of gender. Even though women utilize health insurance more than men, they pay less because of unisex. Women have lower mortality rates than men, but unisex means they pay more for life insurance coverage. Unisex means that women pay more for car insurance, even though they tend to have fewer claims than men.
We also need to note that unisex itself impacts insurance rates. Montana is a sparsely populated state, certainly not a huge profit center for insurance companies. They can sell easily more policies in Seattle than in the entire state of Montana. This means that fewer insurance companies choose to do business here, which lessens competition. Also, insurance companies will have higher administrative costs to make their pricing conform to Montana statute. So to some degree, the unisex law itself increases our rates.
So insurance companies are not eeevil. Really. Corporations are legal constructs, they are not people. And corporations, by the way, do not have free speech rights like people do. Therefore I resist the attempts to anthropomorphize corporations and then demonize them.
Ok, despite all this, I agree with unisex insurance. This may shock some of you, knowing that I’m an insurance agent. But consider: Do you suppose there might be a difference in insurance loss experience between gays and straights? Blacks and whites? Christians and atheists? I actually don’t know if there is, and I’ll bet that insurance companies don’t know either. Why? Because it would be unacceptable to price a product based on factors like these, regardless of any statistical justification.
So this all means there is no real financial incentive for insurance companies to employ gender specific insurance rates, but there might be for Montanans. However, societal issues are also important. Unisex insurance simply means that we have decided it is worth paying the price for excluding gender in insurance pricing.
I happen to agree.
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