Gender-based auto insurance pricing could mean higher rates for women

Lawmakers in Dover are considering legislation (Senate Bill 231) that could make auto insurance more expensive for women drivers across the state. If passed, the bill would ban the use of gender in auto insurance pricing, potentially raising rates for women drivers. Senate Bill 231 was introduced shortly after the Delaware insurance commissioner released a flawed report that inaccurately concluded women paid more than men for car insurance.

While perhaps unintentional, the commissioner’s report is misleading. The report uses highly questionable methodology and does not contain enough data to determine the effect of eliminating gender in auto insurance pricing. The report only looked at women and men aged 35, but women in other age groups often pay less because they have fewer and less costly claims compared to their male counterparts. Before voting on this major policy proposal, lawmakers should insist on seeing actuarily sound data that demonstrates the impact of using gender in auto insurance pricing across all age groups.

Using a wide range of factors, such as driving history, gender, multicar discounts and good-student discounts, in auto insurance underwriting allows insurers to provide the most accurate and fair pricing for each customer. Additionally, having a wide variety of rating factors helps keep the auto insurance market competitive for consumers, which helps keep costs lower as companies vie for business.

Insurers’ rating plans are subject to a rigorous regulatory review process by the commissioner that ensures rating factors, like gender, are being used in full compliance with all laws, including state anti-discrimination laws. Insurers are required by law to submit data to the commissioner supporting all aspects of auto insurance pricing. For years, the commissioner has approved rates that use gender in auto insurance pricing because insurers have submitted data to his office showing gender is an accurate predictor of the likelihood of a loss.

The vast majority of states and the District of Columbia permit auto insurers to use gender as a rating factor. Montana just last year reinstated the use of gender in auto insurance pricing after previously passing legislation to ban it. In January, Maryland voted down a bill to ban the use of gender in auto insurance pricing after the Maryland Auto Insurance Fund, the insurer of last resort, indicated in a fiscal analysis that, without gender as a rating factor, single females younger than age 30 would see an annual premium increase of approximately 37%.

No one wants to pay more for car insurance than they should, and insurance rates should match risk. That is why insurers are committed to using a wide variety of objective data that has been proven to accurately predict an individual’s likelihood of suffering an insured loss. This personalized approach provides a more complete picture of each individual and is the fairest way to determine insurance premiums, keeping prices as low as possible for the largest number of consumers.

Right now, insurers are implementing new practices that make auto insurance more affordable, like making it easier to shop for the best rates, working to ensure cautious drivers benefit from lower rates and undertaking cost-control measures. Insurers also are partnering with policymakers across the country to improve community and traffic safety as a key step to reduce these losses. However, our work is not complete, and insurers are working to increase insurance access and affordability for all communities — and to listen to our customers.

Consumers benefit when insurers can use a personalized approach to determining auto insurance premiums. It results in fair and accurate rates for all drivers and more choice in the marketplace. If SB 231 passes and the use of gender in auto insurance pricing is banned by lawmakers, it could result in higher auto insurance costs for many women drivers in Delaware, especially young women. Lawmakers should vote no on Senate Bill 231 until they are able to gather more information and actuarily sound data to fully understand the bill’s impact on women.

Nancy Egan Vice president and state government

relations counsel American Property Casualty

Insurance Association