Unhappy woman driving her car
Unhappy woman driving her car

Strangely, the California Insurance Commissioner could increase auto insurance rates for women to fight gender discrimination.

To explain, new regulations in California prohibit the use of gender in calculating car insurance rates, a press release indicates. Thus men could pay less for vehicle insurance, and rates for women could increase.

In detail, most people believe auto insurers in the United States charge men a higher rate because accident rates for men are higher. Not surprisingly, American men have long complained about unfair insurance rates.

Gender equity leads to higher insurance rates

Former California Insurance Commissioner Dave Jones heard the complaints.

His agency, the California Department of Insurance, issued The Gender Non-Discrimination in Automobile Insurance Rating Regulation. The rating, which went into effect on 1 January 2019, will force insurers to charge men and women the same rates for vehicle insurance.

A similar experience in Europe indicates auto-insurance rates for some women could double under regulation. For example, an 18-year old woman’s auto insurance premium increased by 50% in the United Kingdom in 2013, The Telegraph reports.

Women’s car insurance rates increased in 2013 after the European Commission forced the insurance industry to adopt gender-neutral pricing in December 2012. The EU adopted gender-neutral pricing after the Court of Justice of the European Union ruled the EU’s guarantee of gender equality applied to the insurance industry.

However, there is no guarantee of gender equity in the United States Constitution. Therefore, state administrators and legislatures determine insurance rates in the United States.

California Insurance Commissioner Dave Jones
California Insurance Commissioner Dave Jones

California is apparently the first American state to apply gender equity to auto insurance.

Interestingly, California law mandates that companies base auto insurance rates only on a driver’s safety record.

Yet regulations formerly allowed insurers to use gender as a factor in determining auto insurance rates.

Jones’ action closes that loophole and guarantees gender equity in vehicle insurance.

Gender equity minimal effect

The effects of gender-neutral pricing on auto insurance are unclear because of disparities in premiums.

For instance, women aged 40 to 60 years pay more for vehicle insurance than men with comparable driving records, a 2017 Consumer Federation of America survey indicates. However, a 20-year-old man with a perfect driving record will usually pay more for car insurance than a woman with the same record, The San Francisco Chronicle reports.

Hence, the new regulation’s impact on vehicle insurance costs in California could be minimal. For instance, the regulation could impact only drivers under a certain age, probably 30.

Risk pricing controversy

The real issue in the gender auto insurance rate dispute is how insurers determine auto-accident risk.

The auto-accident risk is hard to determine because people tend to misrepresent their driving records. For example, many drivers will not report minor accidents.

Moreover, driving records only list violations drivers were ticketed for. In fact, it is not uncommon for very bad drivers to have clean records.

Under those circumstances, auto insurers use a wide variety of questionable factors to determine accident risk. In fact, some US auto insurance companies give students who get good grades lower premiums. The hope is good students are more responsible and better drivers.

Additionally, some auto insurers will increase rates for persons in certain professions. For example, a teacher might get a lower rate while a person in a risk-taking job like firefighting, the military, or sales will pay more.

Surprisingly, California still allows some questionable criteria for determining accident risk. Notably, the state still allows insurers to use marital status as a risk factor. Thus, the state will still face charges of discrimination from singles.

Technology could reduce discrimination

The real problem facing insurers is that it is hard to get an accurate picture of an individual’s driving habits.

For example, insurers have no way of knowing if a driver is more prone to risky behaviour on the road. In addition, insurers have no way of knowing how much a person really drives.

Technology could change this by enabling Usage Based Insurance (UBI). Under UBI an insurer could set premiums based on the mileage a person drives. In addition, discounts could be given for obeying traffic laws, refusing to drive at night, or driving at a lower speed.

Current UBI schemes utilize wireless telematics devices that transmit driving data to an insurer. Several US insurers like Progressive have been offering UBI and telematics for years. However, the public is resistant to the idea, even though it offers lower rates, because of fears of privacy violations.

Thus gender equity could force the widespread adoption of UBI in America auto insurance. Expect UBI to become popular if more countries and states adopt gender equity for auto insurance.

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