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Comment by tdees40 | Hacker News Reader

Slightly OT, but I have an amusing story about Montana-based regulation. I work for an insurance company, and when you price life insurance or annuities, you have two separate mortality tables: male and female. Montana decided that that's discriminatory, so they mandate only using one table. So we use whichever table is more onerous (i.e. male for life insurance, female for annuities). So if Montanan women notice they pay more life insurance, or men pay more for annuities, they can thank their local regulator.

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I don't think you can blame the regulator for that. If you wanted you could calculate tables for "people" regardless of gender. Those tables would more accurately reflect the population than purposely choosing the wrong subset of data to use.

That leaves you open to anti-selection bias. It would make men's life insurance cheaper than in any other state, and you'd likely get more men buying in Montana.

I do t think he's saying remove gender from the equation. Just don't have two tables based solely on gender.

That sounds like a good way to quickly go out of business.

I work in annuity pricing (pretty new in my career though, so I could be wrong), and if we were pricing the product, I think that the net effect wouldn't necessarily be wholly higher prices for annuities/life insurance, despite using the higher of the two rate tables. We price our products so that they all have the same ROI, so if we had to use male mortality for life insurance and female mortality for annuities (thus increasing our ROI), to make up the reduced expense from mortality, we'd make it up by increasing interest credited in the annuity case, or decreasing the cost of insurance in the life insurance case.

There would generally be more variance in mortality income, but I think that the net effect would be pretty small to both the insurer and the consumer.

Women would be paying more for life insurance than they "should" be (relative to men--men would be paying less than they "should" be), and men would be paying more for annuities than they "should" be (and again, vice versa).

So generally Montana is small enough that you just ignore it, so you price it with separate tables and then Montana gets hosed. If Montana were bigger you might go through something like the process you're talking about.

How do you compete with insurers who use a unconditional table rather than assuming the worst case? Presumably they beat your prices for both genders.

that is exactly what i was thinking

Well, so that's the problem! It's Montana, nobody cares. If it were New York or California people would have to think about it a little more.

European Court of Justice ruled that this is the way it has to be in the EU as well. It means, in some countries, women pay more for driving insurance, and men pay more for life assurance.

My male Montana cousins always had cheaper car insurance than I did (also a male) so some companies must be using a different table. Everything else about us (age, grades, miles driven, etc.) was similar.

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