The Elimination of Gender as a Rating Factor in Insurance Pricing
Open Access
- Author:
- California, Margot
- Area of Honors:
- Actuarial Science
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Nan Zhu, Thesis Supervisor
Steven Lee Putterman, Thesis Honors Advisor - Keywords:
- insurance
insurance pricing
gender discrimination
actuarial science
automobile insurance
life insurance
insurance policy
California's Gender Non-Discrimination in Automobile Insurance
Gender Directive
EU Gender Directive
Adverse Selection
Law of Large Numbers
Asymmetric Information - Abstract:
- With an increased focus on social equity in all aspects of daily life, insurance companies have recently been scrutinized for their use of gender as an identifying risk factor in the underwriting process. The general principles of insurance rely on an underwriter looking at a prospective insured’s application and placing them into a risk category with others of similar risk. From there, the policyholder will be charged a rate for insurance based on the risk that the insurance company expects them to impose. Some examples of factors that are considered when creating these rates include age, relevant history pertaining to the type of insurance, and gender. A recent question has been focused around whether it is necessary to include gender as a factor in insurance pricing. In 2012, the European Union implemented a law that no longer allows private insurance companies to consider gender when pricing insurance. As of January 2019, six states in the US have adopted this socially aware practice in their automobile insurance pricing methods. This thesis serves to explore this social issue and how it pertains to the insurance industry. Through thorough investigation of the current adjustments to insurance pricing in the European Union, comparisons will be drawn to the automobile industry in the United States and extended to consider options as the industry continues to evolve its pricing rules with these new restrictions.