Equal Rights, Not Equal Rates

July 29, 1992

Government regulation of business should ensure equity and fairness for the public. When regulation is based on political pandering, even for the majority, it results in undesirable effects. That is the unfortunate impact of the state Insurance Division's decision to require unisex rates for life and health insurance. While righteously wrapped in the banner of equal rights, the ruling against Equitable Life Assurance Society of the United States flies in the face of actuarial statistics that underpin all insurance assumptions and rates.

The result will be higher costs for women to obtain life insurance; men, who on average have shorter life spans, would be subsidized. Men would presumably switch to cheaper unisex life insurance policies in Maryland; women would seek cheaper sex-distinct coverage in other states.

This economic upheaval might be justified if the ruling redressed a true wrong. It does not. Instead, it hews to a narrow interpretation of the state Equal Rights Amendment that will, ironically, disadvantage the group it purports to protect. While feminists who fought for the decision claim victory, it will be a pyrrhic one for most females. True, women would presumably pay less for health insurance and annuities if the broad concept of the agency's ruling is adopted. But most health coverage is employer-based (not sex-based) and far fewer women buy annuities than life insurance policies.

Insurance companies now sell gender-blind, or unisex, life insurance policies, using approved "blended" mortality tables. Some promote them, and most insurers offer them where required by law. (Federal law, for example, requires the same rate for men and women in employer group policies, where the gender mix typically is in constant flux.) But unisex policies marketed as nondiscriminatory often end up costing females more than sex-distinct policies.

Insurers prefer sex-distinct health and life policies. They are a validated means of predicting risk and, therefore, fair pricing. After all, insurance is based on discrimination: those with higher risks pay higher premiums, and the highest risks may be denied by private insurers. Age and health are accepted factors in setting insurance rates, using a standard of fair discrimination. The risks are based on proven statistical probability.

Montana is the only state to prohibit by law insurance rates that are based on gender. Results in that state since 1985 have been unclear. Efforts in Massachusetts to impose such rules were rejected by the courts. A half-dozen states require unisex auto insurance rates, meaning higher rates for young females. Certainly, all states have the obligation to prevent insurers from underwriting decisions that are based on whim or prejudice, not on statistical data. The problem here is that Maryland's Insurance Division has confused equal rates with equal rights.

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