Monday, November 19, 2018

Unintended consequences - automobile insurance for nonbinary people (and binary people)

This is a prime example of how changes in one system can affect other systems.

Ever since driver's licenses were first created, there was an underlying assumption that the holder of the driver's license was either male or female. Because state driver's licenses are the de facto national ID in the United States (or will be once REAL ID is implemented everywhere), the licenses not only verify your ability to operate a motor vehicle, but are used for a whole slew of other purposes, including determinations of rates for automobile insurance. Since California requires that all drivers have insurance, this is a very big deal.

Enter California's Gender Recognition Act (some other states have similar acts).

The Gender Recognition Act simplifies the process for transgender, nonbinary and intersex Californians to obtain a gender or conforming name change on state-issued identity documents. The Name and Gender Act provides incarcerated individuals the ability to change their gender or name in a California court under existing court processes....

Under the simplified processes created by the new laws, individuals may change their gender markers to nonbinary, in addition to male or female, on state-issued identity documents by petitioning a gender and/or conforming name change through a judicial process or revising their birth records. Starting on Jan. 1, 2019, individuals may change their gender markers on their state driver’s licenses and identification cards.

Now this act has all sorts of ramifications at the state, federal, and international level, but I'm going to concentrate on just one of them - the effect on the automobile insurance industry.

In California, it is legal for automobile insurance companies to base your insurance rate on your sex. So, a male might pay a particular insurance premium based upon relevant data derived from historical records, and a female may pay a different insurance premium based upon other relevant data derived from historical records.

Starting on January 1, the appearance on the nonbinary gender will affect this:

The CDI’s public notice indicates that The Gender Recognition Act which permits California driver license applicants to select “nonbinary” to appear on their driver license instead of “male” or “female” beginning on January 1, 2019, has brought forward the problems with using gender as an optional rating factor since there is no historical experience upon which to establish an actuarially justified nonbinary rate. Given the small population size of nonbinary drivers, it is likely that there will never be sufficiently credible data upon which to base such a rate.

So, what's the proposed solution to this problem? Get rid of insurance rates by sex.

Eliminating gender as a rating factor ensures that nonbinary individuals are treated fairly under Proposition 103’s mandate to avoid unfairly discriminatory rates.

However, this is only in the public hearing stage, with a hearing scheduled for December 3. And it is quite possible that those whose insurance rates will go up because of the change will object to the proposal.
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