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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. (more…)

#1: Color Determines Costs

This is simply and completely untrue. Nobody cares about the color of your car. You won’t even be asked about it when you get quotes!

As for the old tale that police will pull you over more if you have a red car, well, that depends on the police officer I suppose.

So what does determine your premiums?

• Driving Record
• Age
• Gender
• Collision History
• Vehicle Type
• Make, Model, and Mileage

The other factors vary from insurer to insurer, and there may be thousands.

#2: Getting the State Minimum Coverage Saves You Money

The less coverage you buy, the lower your premiums cost; that much is true. However, as a consumer, you should understand that insurance is meant to SAVE you money. It saves you thousands of dollars if you are in a collision, it makes sure you can pay your medical bills (and those of others), and it makes sure you don’t have to forfeit your future earnings in a law suit. Insurance can save you tens of thousands of dollars in a collision, but only if you get the right amount.

The right amount of coverage for you has nothing to do with the state minimum. Choose your level of coverage based on the assets you can’t afford to lose: your home, your car, your savings, your portfolio, and so forth.

Some people need only the state minimum: the people who have great health insurance, nothing to lose, and who do not plan on fixing their car if it is involved in a collision.

#3: New Cars Cost More to Insure since They Are Stolen More

Neither of these are really true. When it comes to insuring cars, there is a constant balance being struck between factors. Two of the factors are theft rates and driver/passenger safety.

Used cars are at a disadvantage in terms of insurance costs on both of these fronts.
Theft rates are higher on older vehicles because thieves have had time to develop methods to break the security devices and take the car. Newer cars are simply harder to steal because thieves don’t have the tools.

Newer cars are also more up-to-date with modern safety regulations, meaning they are generally better at protecting the driver and passengers in the vehicle. Used cars are usually not quite as good at protecting their contents. (more…)