In a decision that could transform the way insurers set prices in Maryland and beyond, state regulators banned yesterday a time-honored practice of charging men and women different rates for the same policies.
The Maryland Insurance Division ruleed that the state's Equal Rights Amendment prohibits insurers from using policyholders' gender to determine their premiums.
The ruling was hailed by women's rights groups as a victory against a system they claim is discriminatory and costly to women. The insurance industry, however, vowed to fight the decision, defending the current system as fairer and less costly for women.
Although yesterday's decision affected only the life and health insurance business of the Equitable Life Assurance Society of the United States, the wording was so broad that legal experts said yesterday the ruling was likely to affect other insurers and other types of insurance in the state.
"The practice of charging men and women different rates for insurance coverage is unlawful discrimination just as it would be unlawful discrimination to charge different rates for blacks, whites, Italians [or] Jews," Thomas Paul Raimondi, associate deputy insurance commissioner, wrote in the decision.
Until now, insurers in Maryland and most other states have charged men more than women for life and auto insurance policies because statistics show that men, on average, die younger and are involved in more accidents. Women have been charged more than men for annuities and health insurance because other statistics show that they, on average, live longer and rack up higher medical bills.
Mr. Raimondi agreed with Equitable's claim that its rate differentials were based on sound historical evidence. But, he said, the statistics don't justify discrimination. "The time has come to lay to rest the notion that gender discrimination is any less repugnant than actuarially justified discrimination on the basis of race, creed, color or national origin," he wrote.
The federal courts have already ruled that insurers cannot discriminate by sex on group policies, such as those provided by employers, so the state ruling affects only policies purchased by individuals. The ruling would affect rates set after Dec. 31, 1992.
But Equitable said yesterday that it will appeal the decision, suggesting that the case, which has been percolating through Maryland's legal system for 17 years, could remain in the courts for years.
"This type of pricing is a time-tested system based on scientific computation that treats fairly each group of individuals," said Equitable spokeswoman Mary Mannarino.
The latest ruling marked the second time Equitable has lost its argument on the merits of the case.
Maryland's Human Relations Commission filed the discrimination case against the New York-based insurer in 1975 and, after 11 years of legal wrangling, initially won its case in 1986.
But Equitable, the nation's third-largest life insurer, convinced a state appeals court that the commission shouldn't have jurisdiction over insurance rates. The case was then sent to the ++ state's Insurance Division, leading to yesterday's decision.
Lawyers for the Human Relations Commission and women's groups hailed the decision as a precedent-setting blow against discrimination.
This is the first time a state's equal rights amendment has been used to overturn life and health insurance pricing systems, said Sally L. Swann, the state attorney who prosecuted the case. The Maryland ruling could spark similar court battles in the 15 other states with ERAs, she said.
In 1985, Montana became the first state to ban gender-based pricing of life and health insurance when its Legislature passed a law requiring insurance rates to be set without regard to gender.
Six other states have banned gender-based pricing of automobile insurance policies.
And a spokeswoman for the National Organization for Women said the ruling would end up saving women thousands of dollars.
Although unisex pricing probably would increase the prices women pay for auto and life insurance, they would save much more on health insurance and annuities, she said.
Deborah Ellis, director of the NOW Legal Defense and Education Fund, said unisex pricing in Montana, the only state to ban gender-based rating in all insurance lines, could save each Montana woman up to $20,000 over her lifetime.
Insurance executives criticized the decision yesterday, warning that unisex pricing would force companies to charge unfair prices and could drive policyholders out of state in search of cheaper premiums.
"We think it is fairer to price risks according to their risks, otherwise you have one group subsidizing another," said Gary Herriger, vice president and general counsel for the Baltimore Life Insurance Co.
Mr. Herriger said the decision was worded so broadly that, if upheld by the courts, it would be applied to all insurance companies that sell in the state, including automobile insurers.
That probably would send many Marylanders to other states for their insurance, he said. For example, women might drive to Virginia to buy auto insurance policies if that state allowed insurers to offer discounts to women drivers, he said.