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How do unisex rating regulations affect gender differences in insurance premiums?

Author

Listed:
  • Vijay Aseervatham
  • Christoph Lex
  • Spindler, Martin

    (Munich Center for the Economics of Aging (MEA))

Abstract

As of December 21, 2012, the use of gender as an insurance rating category was prohibited. Any remaining pricing disparities between men and women will now be traced back to the reasonable pricing of characteristics that happen to differ between the groups or to the pricing of characteristics that differ between sexes in a way that proxies for gender. Using data from an automobile insurer, we analyze how the standard industry approach to simply omit gender from the pricing formula, which allows for proxy effects, differs from the benchmark for what prices would look like if direct gender effects are removed and other variables do not adjust as proxies. We find that the standard industry approach will likely be influenced by proxy effects for young and old drivers. Our method can simply be applied to almost any setting where a regulator is considering a uniform-pricing reform.

Suggested Citation

  • Vijay Aseervatham & Christoph Lex & Spindler, Martin, 2014. "How do unisex rating regulations affect gender differences in insurance premiums?," MEA discussion paper series 201416, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    • Handle: RePEc:mea:meawpa:201416
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Shan Huang & Martin Salm, 2020. "The effect of a ban on gender‐based pricing on risk selection in the German health insurance market," Health Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 3-17, January.
    2. David A. Cather, 2020. "Reconsidering insurance discrimination and adverse selection in an era of data analytics," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(3), pages 426-456, July.
    3. An Chen & Montserrat Guillen & Elena Vigna, 2017. "Solvency requirement in a unisex mortality model," Carlo Alberto Notebooks 504, Collegio Carlo Alberto.
    4. Huang, Shan & Salm, Martin, 2020. "The effect of a ban on gender-based pricing on risk selection in the German health insurance market," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 29(1), pages 3-17.
    5. Mercedes Ayuso & Montserrat Guillen & Jens Perch Nielsen, 2019. "Improving automobile insurance ratemaking using telematics: incorporating mileage and driver behaviour data," Transportation, Springer, vol. 46(3), pages 735-752, June.
    6. Bian, Yiyang & Yang, Chen & Zhao, J. Leon & Liang, Liang, 2018. "Good drivers pay less: A study of usage-based vehicle insurance models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 107(C), pages 20-34.
    7. Mercedes Ayuso & Montserrat Guillen & Ana María Pérez-Marín, 2016. "Telematics and Gender Discrimination: Some Usage-Based Evidence on Whether Men’s Risk of Accidents Differs from Women’s," Risks, MDPI, vol. 4(2), pages 1-10, April.

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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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