In January 2019, California united with a half-dozen states in banning a person’s gender in determining different factors for car insurance. This major change could alter rates for many drivers in California.
California is the most populated state in the country. Certain criteria like years of driving experience and safety records determine auto insurance rates for both male and female equally. However, marital status still plays a part. Prior to the change gender had been an optional criteria.
The departing state insurance commissioner, Dave Jones, said the new regulations “ensure that auto insurance rates are based on factors within a driver’s control, rather than personal characteristics over which drivers have no control.”
The new regulation went into effect
Jones’s term ended early January. Putting the new regulation in place was something he wanted to do before he left. The State’s Insurance Department agreed with the change. Insurance companies found female drivers a higher risk and some found male drivers a higher risk.
“Gender’s relationship to risk of loss no longer appears to be substantial,” the department noted. Charging drivers different rates by their gender might have seemed like a good idea decades ago, California’s new commissioner, Ricardo Lara, said. “Gender, race, ethnicity or sexual orientation are beyond your control, and it is not a fair or even an effective way to predict risk.”
The impact of the change is not known yet. Insurance companies have a July deadline to submit their gender-neutral rating plans.
Inexperienced drivers will most likely see a decline in rate. Young men specifically might see a decline. On the other hand younger women could see higher rates. According to the Insurance Department female motorists with three years and lower experience will feel the biggest impact of having higher rates. Male drivers with the same experience will most likely see a 5 percent decrease in rates.
According to the department analysis a fraction of the rates may differ.
Ultimately determining any rate comes down to a multitude of factors. Not just gender or years of experience driving.
Other states that ban gender bias
Other states that currently ban the use of gender when calculating rates include Pennsylvania, Hawaii, Massachusetts, Montana, and North Carolina. This information came from the Consumer Federation of America, a nonprofit association. Other states believe that using gender is a proper practice in determining car insurance rates.
On a national level men have paid about 1 percent higher through 2016 and women higher since then. Minnesota, Nevada, and Utah have the highest difference in rates between men and women. Premiums are varying between 4 and 6 percent.
Women over 25 are paying more
An insurance expert, Douglas Heller, gave testimony to the Insurance Department supporting the change on behalf of the Consumer Federation of America. Women over 25 can pay much higher rates than men even with similar driving records.
“By using gender as a rating factor,” Mr. Heller said in his testimony, “insurers diminish the impact of more appropriate rating factors, such as driver safety, miles driven and driving experience.”
Newest gender option
This newest California rule change follows the Gender Recognition Act of 2017. Californians are allowed to choose male, female or non-binary on their state driver’s license. Non-binary is an umbrella word described as gender identities that “fall somewhere outside of the traditional conceptions of strictly either female or male.” The option became available January 1, 2019.
Being an insurance expert I can tell you that every 3 years or so something changes causing insurance rates to go up or go down. Actuaries are constantly looking at rates and data points.
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