Hacker News Reader

Comment by theBobBob | Hacker News Reader

Interestingly the EU has banned insurance underwriting based on gender even with all the actuarial data backing it up. Age is still fair game though.

View on HN

So (assuming males are more costly to insure) either (a) females pay more than they should and are effectively subsidizing males or (b) males pay less than they should and the insurance companies will go broke..

On the other hand, we didn't choose to have high levels of testosterone in our bodies.

Or (c) insurance companies still make positive returns on both male and female customers, and the regulation just reduces their overall profits without creating losses which must be subsidized by female customers.

(d) Insurance companies increase insurance premiums for every customer not in the young male demographic, blames "regulation". Results skyrocket. Management awards themselves seven digit raises to "keep attracting the best talent".

It's OK because we subsidize their Health Care: men and women pay the same for the same age, but women use way more than men.

Citation?

Here you go: https://www.ncbi.nlm.nih.gov/pubmed/18439060

Yes, female premiums went up to cover the cost of not having that factor in the model.

Fortunately I'm sure people are hard at work finding "proxy factors" which happen to map to pretty well gender but have an acceptable parallel explanation for why they're meaningfully descriptive of an applicants risk profile :)

Which made the insurance for women, who are traditionally safer drivers because not taking unless risks, go up. Well facts can't be racist but they are at the same time.

But if you were a man who was an excellent driver, would you like it that you get to pay more just because you were born into a gender that was "more reckless"?

Plus, women want equal rights, so why not be equal in this, too?

I think for things like insurance, or healthcare taxes (the model adopted by most countries) it's fair to normalize the price for everyone. Otherwise, the system doesn't really work.

Price of insurance is not a right.

It is not fair to normalize the price. It penalizes people who are healthy and good drivers (for example not smoking and speeding).

The whole purpose of insurance is to normalize the price. Without insurance, people who take the most risks with their health/driving would be more likely to pay (or at least owe) millions, while the health-conscious and risk-averse would generally pay much closer to $0 (until they get old or unlucky).

It's interesting that insurance premiums can act as behavioral incentives in some cases, but I doubt it has ever led someone to change their gender or race.

No, the purpose of insurance is to hedge the risks (i.e. one would prefer to take 0$ than to take a 50-50 bet on 1000$).

For example, the price of bond insurance is not normalized between bonds with different ratings.

Risk analysis is just an implementation detail that aids price discovery in a competitive market. If an insurance provider can identify customers with lower risk than the consensus, they can offer lower premiums and attract that business. If they identify customers with higher risk, they can charge higher premiums and push that unprofitable business to a competitor.

Supposing this price discovery were perfect, customers who make a claim would have already paid premiums equal to the claim, and customers who never make a claim would pay nothing (plus fees in each case). This aspect of insurance obviously serves no core purpose. The purposeless of it is just hidden in the noise of uncertainty, and we see pricing differences emerge out of the uncertainty.

The actual purpose is to blunt the effect of catastrophic losses by spreading a smaller burden across a larger population. One caveat is that insurance can sometimes have the effect of "rewarding" risky behavior and "punishing" cautious behavior. Now, it's interesting that price differences can sometimes balance that by reversing the punishment/reward incentives, but only if prices are based on risk factors that the customer can actually control.

Auto and life insurance are usually more expensive for men, but health insurance is usually more expensive for women. It would be interesting to see who comes out ahead overall.

Since the 80's, the state of Montana has banned insurance underwriting based on gender. There have been attempts to reverse that law, but none have passed.

My male Montana cousins always had slightly cheaper insurance than I did, but my female Montana cousins more than made up for it.

Is it just driving insurance or also other kinds (e.g. health insurance, where women might be paying more than men)?

Reply on news.ycombinator.com