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.