- Where Insurance & Technology Meet

Age and Gender in Underwriting: The Politics of Neutrality

A recent ruling by the European Court of Justice suggests that insurers may be forced to take age and gender out of the underwriting process.  While seemingly taking  the high ground, similar initiatives have been eviscerated by the scalpel of politics.  And Canadian technology professionals were collateral damage in the last attempt at this in the province of Ontario.

Back in the late 1980s, the Liberal Government in Ontario wanted to do something about rising automobile prices.  The solution was to create a commission which would be seen as providing rules for ‘fair’ pricing of the product.  The Kruger Commission was formed, which recommended, after many months of study and hearings, removing age and gender as variables in the underwriting process.  This must have had a nice ring to it, as the government introduced legislation mandating automobile insurers to implement the required changes and file new rates.

These were the days when making simple changes to rate tables was  a non-trivial technology task.  The proposed changes were anything but trivial.  Many professionals at insurers  and system vendor shops work long days and weeks for  months getting ready.  Most succeeded just in time.

The filing date came and, as some had sagely predicted, the rates were fair … but fair to the ‘wrong’ people.  Removing the age/gender rating criteria meant that younger, single, male drivers could not  be surcharged, and the burden of the premium would have to be borne by more mature (read older) and non-male (meaning female), non- unmarried (meaning married)  drivers.  Virutually every major insurer filed rates reflecting a 17% increase.

The opposition political parties had a field day in the House of Commons.  “So this is what the Liberal government meant when it said it had a plan to reduce auto insurance rates. Let us see another plan,” said one opposition member.

“The report details increases of 82 per cent, 42 per cent, 48 per cent and so on. The chairman of the board, Mr. Kruger, says these kinds of increases are ‘just and reasonable and not excessive.’  Does the minister agree with Mr. Kruger that 42 per cent to 82 per cent increases covering just a nine-month period are just and reasonable?”  asked another member.  More pithy quotes can be found in the official transcripts.

Shortly thereafter, the provisions for age and gender neutrality were withdrawn from the legislation.  At that point, all the IT people who had worked so hard to get the new rate and rule code developed and tested realized that they had spent 6-9 months of their working life for nothing.

If the wages of sin are death, perhaps the wages of attaining age/gender neutrality are limbo.