Are higher car insurance rates for males under 25 discimination?

December 12, 2005 3:56 PM

How is charging more for car insurance to males under 25 not discrimination?

I just hit the 25 mark and saw my rates go down, but I can't understand how it's not discrimination. I understand statistically males under 25 may be a higher risk, but what's the difference between charging more for us than charging more based on race, ethnicity or other factor that might have a statistic basis? My iBook's dictionary defines discrimination as " the unjust or prejudicial treatment of different categories of people or things, esp. on the grounds of race, age, or sex". How is this legal?

posted by Jomoma to work & money (41 comments total)

Legal discrimination is not dictionary discrimination. There are plenty of legal forms of discrimination. If I were a landlord, I could refuse to rent to anyone named Joe.
posted by nomisxid at 4:01 PM on December 12, 2005

It is discrimination, but it's not considered unjust since it's not arbitrary but based on statistics. Justified discrimination is different from "prejudice" and is usually quite legal. (Usually, not always!)
posted by Khalad at 4:02 PM on December 12, 2005

Apparently, according to my car insurance agent (AAA), California law no longer allows discrimination on the basis of gender or age when it comes to car isurance premiums.

But, they can (and do) discriminate on the basis of how long you've been driving.

The premiums are higher for people who have been driving for less than 9-10 years and people have been driving for more than ~50, who are "too experienced." Of course, the "too experienced" category is their way of charging more for senior citizens, who are statistically more dangerous. Interestingly enough, a 80-year-old who starts driving at age 60 will have MUCH lower rates than a 80-year-old who started driving at 16.
posted by JMOZ at 4:04 PM on December 12, 2005

statistics, in the practical sense, is neither moral nor immoral. but can you imagine the results if auto insurance rates were also based on religion, race, or ethnicity? good lord.

personally I am amazed that they can continue to base it on gender.

on the one hand, I think it's fine if they base it on anything they want, impartially and fully statistical.

on the other hand, I think insurance is quite a heinous idea in the first place, so it's a perverse use of statistics in any case. insurance is about minimizing risk -- to the insurance company, and maximizing profit -- to the insurance company.
posted by dorian at 4:07 PM on December 12, 2005

Your iBook dictionary defines words as they are commonly used. This is sometimes different than the legal definition. It is discrimination, but not everything which is discrimination is illegal.

Put simply, there is no prohibition in the law¹ against basing insurance rates on age or gender. There are laws against discriminating in hiring based on gender (and on age, but even then only discrimination between 40 and 70 is prohibited, IIRC), but a law prohibiting discrimination in hiring does not prohibit discrimination in insurance rates.

Put simply, in the U.S., whatever is not specifically prohibited is permitted. And basing insurance rates on age or gender is not prohibited. There's no blanket prohibition on any discrimination, ever. Just against discrimination on certain bases, in certain situations.

¹On preview, in federal law. Laws of individual states may prohibit additional types of discrimination which state law does not, as JMOZ notes.
posted by DevilsAdvocate at 4:07 PM on December 12, 2005

As a male who was formerly 25 I would characterize it as insane for the insurance companies not to discriminate. I tore up a number of cars, mostly mine, during those years.

Next time you see someone weaving in and out of traffic on the freeway note that person's age and gender.
posted by Carbolic at 4:14 PM on December 12, 2005

I always wondered this in terms of "female only" insurers...
posted by benzo8 at 4:21 PM on December 12, 2005

Actually, dorian, insurance is about spreading risk, from you to lots of other policyholders. It's a lot less heinous than being bankrupted when your house burns down.

Anyway, as people are saying, only certain kinds of discrimination are banned. It might be as unjusitified to discriminate against people because of their hair colour as their race, but in most places that's not illegal (presumably because people can change their hair colour, but not their race, Michael Jackson notwithstanding).

And, speaking as an under-25 male who sees who other under-25 males drive because they're young men, I think it's a lot more fair to charge me more for insurance than to charge everyone else higher rates, just as 80 year-olds should be charged more - they are more dangerous drivers, on average, because they're so old. You'll spend most of your life benefitting from this discrimination, so I wouldn't complain too much (not that I would say that if I thought it were unjustified).

Also, you could probably sue an insurance company if there were no statsitical basis on which to differentiate rates, even if it weren't contrary to explicit statues, but I could be wrong about that. But if the discrimination didn't make sense from a financial standpoint, some competing company would probably offer a policy which didn't discriminate in the first place.
posted by Dasein at 4:21 PM on December 12, 2005

Next time you see someone weaving in and out of traffic on the freeway note that person's age and gender.

Nearly always 25-40 year olds in BMWs, Porsches, or Ferraris in my experience.

I think discrimination in insurance is meaningful. Consider home insurance. If you live in a flood region, would it be discrimination to get a higher premium because of the mere location of your house? Well, no, not really.

Personally, I think discriminating on employment is worthwhile too, as certain genders, body builds, and so on, cannot perform certain jobs to certain expectations. Why would I want to hire a weedy 100lb woman to carry lumber?
posted by wackybrit at 4:24 PM on December 12, 2005

yes, certainly the theory is that it's spreading risk. and it does tend to work. but the practice, I dnno, I still find more than a little distasteful -- the company is spreading risk to the other clients and using statistics to minimize it to themselves. it makes perfect sense as a business, it's just that I don't find it terribly ethical.
posted by dorian at 4:27 PM on December 12, 2005

It's only unethical when they don't pay up as they should (which, I grant, they do with shocking regularity, but skeezy practice is different from the concept of insurance). People sign on to insurance knowing exactly what they're getting into, because it's a sensible thing to do, in everyone's self-interest. Also, the company has an obligation to be sensible in minimizing risk to themselves, or they go under and then no one's any better off, not their shareholders, not their policyholders.
posted by Dasein at 4:29 PM on December 12, 2005

Would this policy fly if it was statistical proven that a certain race was more likely to make a claim? How about if left-handers were statisically proven to crash more often? It seems to hurt a group that's not going to stand up for themselves.

I understand that the statistics are real, but it is definately unjust for the government to mandate that we carry insurance, and then that insurance's cost is based on age or sex.

I know its not illegal, but I think it should be. Perhaps it hasn't been challenged because the age group hasn't discovered the joys of challenging the legal system.
posted by Jomoma at 4:41 PM on December 12, 2005

I understand all of that and even accept it to some extent, but will still disagree in a friendly manner. shall we leave it at that and head back to topic?

on the one hand I believe any private company should be able to engage in any sort of discrimination it wishes, regardless of whether that is helpful or hurtful as a business practice. the theory is that companies with such stupid policies ultimately will not survive.

on the other hand, I recognize that due to the history of this country laws have been made regarding discrimination by private companies (as DevilsAdvocate said) -- and while I would find such laws disagreeable in a more perfect world, they do tend to make some sense in the one we live in. the practice is that companies with such stupid policies do survive (e.g. sweatshop labor) -- so we need laws or something to deter them.

I guess what I am rambling towards is that to prevent discrimination in select cases only is confusing, hence Jomoma's question. should such laws be applied against everything, or not at all?
posted by dorian at 4:43 PM on December 12, 2005

Personally, I think discriminating on employment is worthwhile too, as certain genders, body builds, and so on, cannot perform certain jobs to certain expectations. Why would I want to hire a weedy 100lb woman to carry lumber?

uh, then you'd say the requirements of the job are "ability to carry x lbs of lumber", not "no women allowed". that'd weed out your weakass dudes, too.

problem solved.

look at me, i'm vanilla ice.
posted by fishfucker at 4:46 PM on December 12, 2005

I believe any private company should be able to engage in any sort of discrimination it wishes, regardless of whether that is helpful or hurtful as a business practice. the theory is that companies with such stupid policies ultimately will not survive.

The problem is when the services of that type of company are mandated [i.e. everyone MUST carry insurance] and ALL the companies that provide that service have this same sort of discrimination, then you don't really have a situation where consumer choice drives anything, do you?

Do any of you remember the lawsuit that was filed against the dry cleaners that charged more for "women's" shirts than for "men's" shirts. The argument was that women's shorts were, on average, more costly to clean blah blah blah. I don't remember specifics, but I believe that the courts told them that they could charge based on actual criteria, but not just gender-based clothing distinctions.
posted by jessamyn at 4:51 PM on December 12, 2005

exactly -- when services are mandated / universal / etc., does it make sense for these services to be provided by private companies? I'm no socialist, but even still I'm not sure.

think poll tax. think salt. think india.
posted by dorian at 4:56 PM on December 12, 2005

also, whether the service is universal or not, it seems that these days most companies would rather engage in the same sort of (usually profitable) discrimination rather than compete. i.e. the theoretical system does not work.
posted by dorian at 4:57 PM on December 12, 2005

At least there are statistics to back up the discrimination against gender and age. On the other hand, I'd like to see their data correlating speeding tickets and accidents.
posted by knave at 5:12 PM on December 12, 2005

"too experienced."

Excuse me, I had to laugh ! It's like work , you're not enough experienced to work, but without working you can't get enough experience.
posted by elpapacito at 5:25 PM on December 12, 2005

Next time you see someone weaving in and out of traffic on the freeway note that person's age and gender.

Talking on a cellphone while driving is a gender, now?

What a time to be alive. The future. I made it.
posted by interrobang at 5:27 PM on December 12, 2005

the sad thing is, that sorta makes sense -- "too experienced" == "too complacent and confident in your obviously negligent atrophied ignorant driving style" ...

i.e. just 'cos it hasn't caught up to you yet doesn't mean it ain't gonna. y'know, statistics. consider that thread in the blue about supercars and the autobahn and the licensing requirements for germans. then think about the licensing requirements for us in the usa. then think about the non-requirements for re-licensing for people of any age after already having gotten a license.
posted by dorian at 5:32 PM on December 12, 2005

Would this policy fly if it was statistical proven that a certain race was more likely to make a claim? How about if left-handers were statisically proven to crash more often?

As explained above, certain discrimination is perfectly legal, while other kinds of discrimination isn't. It's legal for the Catholic Church to discriminate against gay people, for instance. It's illegal for a company's HR department to discriminate against black people. So to answer your questions: no to #1, yes to #2. If enough lefty's get up-in-arms and pass a civil rights bill, then no to #2.

Experience is usually the best indicator of how well you drive, to a certain extent (until you get very old), so I don't have a problem with charging inexperienced drivers more. But then, I also think people who race cars should get lower premiums. And I think city drivers should get lower premiums than those in immediately-surrounding suburbs, who will visit the cities and bring along with them their inattentive, indecisive driving "style."
posted by Civil_Disobedient at 5:36 PM on December 12, 2005

As other people have pointed out, gender- and age-based discrimination is perfectly legal if (a) it is done by purely private parties or (b) there is a legally sufficient justification for it. For federal law to prohibit discrimination, there needs to be some state action-- purely private action doesn't count. This rule is inoperative if the private action "affects interstate commerce," and the SC is willing to say that almost anything affects interstate commerce. Thus, the feds probably could make a law if they wanted to, but there is no affirmative obligation to outlaw gender/age discrimination in insurance. Individual states can and do pass laws about discrimination in insurance.

The appropriate question isn't so much "Why isn't this discrimination" as "Why can this insurance company discriminate."

You can actually get into interesting questions about state action-- does the fact that auto insurance is mandatory mean that the state has acted and is thus responsible for the insurer's discrimination? If this is the case, then the gender-based discrimination is legal only if it bears a substantial relation to some important government interest. I would say that the statistical correlation between males and accident-proneness is not strong enough to be a "substantial relation" (see Craig v. Boren), although keeping everyone insured (at a price that won't force the insurance companies out of business) is probably an important governmental interest.

Thus, if you find that state-mandated auto insurance is sufficient state involvement with the insurance companies to be "state action" under the 14th amendment (Civil Rights Cases, Burton v. Wilmington Parking Authority), then the gender discrimination is unconstitutional.

Can you tell I am taking my Constitutional Law final in a few days??
posted by ohio at 6:01 PM on December 12, 2005

Thanks ohio,

So basically its only legal because it hasn't been challenged? In that case, under 25 males of the US, unite! Let's put one of us in office who can start to lobby for change... uhhh never mind... we're still too young to take office, and all of us are too busy in college or fighting in a war, or just too poor (in part due to insurance) to fight it legally.

I understand it's legal, I just think it shouldn't be. And it's not going to change because it affects a group that's not going to or be able to go through the costly steps to change it.
posted by Jomoma at 6:22 PM on December 12, 2005

It is discrimination plain and simple. I'm 51 years old and still think it is. My opionion only. Would love to be able to "vote" to overturn it...
posted by orlin at 6:22 PM on December 12, 2005

Ohio is right on with his explanation, i.e. that as long as it's not state action (action by a local, state or federal government), discrimination in the providing of services based on age and gender is permissible. This only applies to providing services and what a company charges for services, though...employment discrimination is prohibited by statute.

The reason that a private company can't discriminate based on race is that the 13th Amendment (the Amendment that made race discrimination illegal) has been interpreted to apply to private companies as well as state actors (the actual wording of the Amendment is to "eliminate the badges and incidents of slavery," but this has been extended to all types of discrimination based on race). Therefore, for a company to discriminate based on race, it needs to come up with a damn good reason, which has only rarely (if ever...haven't looked at con law cases in awhile) been done.
posted by elquien at 6:24 PM on December 12, 2005

They discriminate based on age, gender, grades (as evidenced by report cards), and military status of yourself or near family members (USAA is lots of fun).

I've also heard that insurance companies can discriminate based on the color of your car(s), on the principle that a hot-red car is more likely to be distracting or something, but I've never heard that claim backed up.

The companies I'm familiar with don't discriminate based on race or sexual orientation. I can't imagine any would find it worthwhile.
posted by booksandlibretti at 6:37 PM on December 12, 2005

In states that have Equal Rights Amendments in their constitutions (PA, Ca), insurance companies are prohibited from men more for car insurance. Oddly as this article shows, the National Organization of Women is actually against gender neutral premiums.


posted by bananafish at 6:52 PM on December 12, 2005

The reason that a private company can't discriminate based on race is that the 13th Amendment (the Amendment that made race discrimination illegal) has been interpreted to apply to private companies as well as state actors (the actual wording of the Amendment is to "eliminate the badges and incidents of slavery," but this has been extended to all types of discrimination based on race).

Umm...what 13th Amendment have you been reading?

13th - prohibits slavery (but nothing about badges or whatever)
14th - essentially makes the former slaves citizens; purportedly had the effect of making the Bill of Rights apply to states
15th - extends the right to vote to blacks
posted by SuperNova at 7:43 PM on December 12, 2005

In British Columbia, automobile insurance does not discriminate on anything more than three factors:

1. Where you live: per-capita accident rates are higher in some areas, thus it costs a bit more to insure in those areas;

2. What you drive: typical repair costs on some models of car are outrageously high. The plastic lense across the back of an Accord costs a couple thousand dollars all on its own. Cars with very high typical repair costs, cost more to insure.

(Consequently, it just may be cheaper to insure a BMW Z3 than a top-end Honda Accord; not many Z3s getting crunched, so they've a lower repair cost to the insurance company.)

3. How well you drive: the longer you go without an accident, the less you pay. The more accidents you have, the more you pay. I currently sit at the maximum discount, a bit more than 40% reduction in base cost for having something like 20 years accident-free driving. Nonetheless, were I to have several at-fault accidents over the period of a year, I'd soon be paying a hefty premium over the base cost.

We have no insurance discrimination based on age or sex.

We also have some of the lowest insurance costs in Canada, and one of the healthiest public insurance agencies.

Proof positive that some public services can be operated more efficiently, and to greater public benefit, than private services.

Our licensing is now graduated: afaik, new drivers pass through three stages now. First stage is, iirc, driving only when accompanied by a fully-licensed passenger and only during daylight hours; second stage has, iirc, passenger and time-of-day restrictions; third stage has no restrictions but continued heavy-duty consequences if caught drunk.

We seem to be slowly heading in the right direction with all this.
posted by five fresh fish at 7:52 PM on December 12, 2005

Umm...what 13th Amendment have you been reading?

Er...realized right after the post that the "badges or incidents of slavery" language comes from the so-called Civil Rights Cases decided by the US Supreme Court in the late 19th Century, and not from the actual 13th Amendment (sorry...don't have my con law books handy). The SCOTUS interpreted the language of the 13th Amendment to prohibit any "badges or incidents of slavery," which has subsequently been interpreted to prohibit any discrimination based on race, even for private parties.
posted by elquien at 8:39 PM on December 12, 2005

It's not discrimination if they charge all males under twenty-five more. However, in some states you get a lower premium before twenty-five if you get married. So tying the knot might be one way to get around it.
How same-sex marriages or the denial thereof might affect that marriage discount is an interesting question, but not the OP's.
posted by trondant at 9:05 PM on December 12, 2005

My brother is a statistician. Though it is fairly widely accepted that that those under 25 cause more accidents than those over 25, he has made it quite clear to me that all statisticians are professional liars. A good one can make any set of numbers tell any story he/she'd like.

Give me a set of numbers and I'll prove to you that men between the ages of 39 and 42 cause more accidents on Sunday afternoons if they are left-handed and like pepperoni on their pizza.
posted by ThFullEffect at 3:22 AM on December 13, 2005

It is discrimination, but it's not considered unjust since it's not arbitrary but based on statistics.

That doesn't make any sense. I mean, if I were a landlord, I could say with equal accuracy that I was going to charge black people more money because blacks are more likely to commit crimes which could harm my other tenants and drive down property values.

I think the only difference is that it's been clearly established that you can't discriminate in housing or hiring and it hasn't been as well established that you can't discriminate in providing services.

I don't think it's consistent to say it's OK charge more for insurance (which is required by law for all drivers, which makes it something of a de facto requirement for all adults in many areas) based on sex OR age (age is a protected category in many cases, though it's only ever intepreted to protect old people who can't do their jobs anymore) but to say that other forms of discrimination are legal.

Either make everything completely based on the individual, or make all forms of discrimination legal and hope that our society has progressed far enough that this won't change much. Otherwise it's just a case of "Who is it OK to hate today?"
posted by dagnyscott at 5:46 AM on December 13, 2005

Insurance is all about managing risk. I see nothing wrong with companies charging those groups that are more expensive to insure more money. The problem with insurance companies is entirely related to those companies that attempt to weasel out of paying claims. This often seems caused by the "shareholders" who demand profit from the company.

The skeezyness of the insurance industry is a primary reason I use USAA for my insurance needs. No, they aren't the cheapest (but quite competitive), they are privately held, amazingly well respected in the industries they provide service, and provide excellent service. Note: I just (as in yesterday) recieved a refund ($55 on a $1000 yearly bill) for my car insurance for the past year. I have recieved these refunds for as long as I have been paying for car insurance. Basically they took in more money than they needed to cover all of the claims for the year. My parents recieve refunds on the policy for their home more often than nought.

Note that USAA has eligibility requirements that basically say you have to have been in the military, are the kid of someone who was in the military, or are a child of a USAA member. Is this discrimination?

As to the legality of it... it is legal because it hasn't been made illegal. The argument for fair housing standards which don't allow discrimination is because housing is considered a neccessity. If it were made illegal than the government might as well just take over the insurance industry (and we have seen how well they do managing flood insurance).
posted by fief at 7:36 AM on December 13, 2005

I mentioned USAA above, although not as in-depth. Note that they will also insure the grandkids of officers!

USAA is awesome. We get telemarketers all the time: "WE can save you TONS! Quick, what insurance company do you have now?" When we say "USAA," all we hear is a sad, distant little click.
posted by booksandlibretti at 7:41 AM on December 13, 2005

I understand that the statistics are real, but it is definately unjust for the government to mandate that we carry insurance, and then that insurance's cost is based on age or sex.

all statisticians are professional liars.

Here's a thought experiment: why hasn't anyone started an insurance company that ONLY offers insurance to those under 25, and charges the same rate as other companies charge for those over 25? It certainly should get a lot of business.

As for it being unjust for the government to mandate insurance, how would you feel if you were badly hurt by a driver without any insurance at all? Do you mind paying extra to insure yourself against such cases? Do you think there is any tragedy in a situation where someone (you?) without any insurance got badly hurt in an accident caused by someone else who also had no insurance? In such a case, who should pay for hospital care? replacing the car of the person not at fault? the lost wages of the person in the hospital (you)? pain and suffering? permanent disabilities?
posted by WestCoaster at 9:24 AM on December 13, 2005

It's a biological fact that around 24/25 behavior changes markedly. Impulsiveness and risk-taking decline considerably. This has been shown and reproduced in many studies on behavior and is used throughout different fields, including drug and alcohol rehab. So they charge the under 25 set more because over thousands of cases, under 25 year-olds do more stupid, destructive and expensive things.
posted by docpops at 3:11 PM on December 13, 2005

There are many 25 year-olds that do not get into accidents, doc. Why should those good drivers be penalized for the bad ones?

Read what I posted about ICBC. It is immensely profitable, has some of the lowest insurance rates in Canada (possibly in North America), and does not discriminate.

Insurance companies do not have to discriminate when the base rate is fixed in stone. They can subsequently charge bad drivers more, and good drivers less. It is only because consumers can shop around for lower rates, that it becomes necessary to screw all consumers instead of just the bad ones.

What is needed is for the state government to set a minimum insurance standard specifying coverage and cost; and to make it illegal to discriminate based on the standard age, sex, race, religion, etc. metrics. The insurers will then reward accident-free drivers, and punish accident-prone drivers, without prejudging them.
posted by five fresh fish at 4:50 PM on December 13, 2005

So I don't understand. How is it that ICBC can do this, contrary to every other insurance company I've ever heard of and still turn a $389M profit, according to their annual report? It seems to me that, with this example out there, you don't need laws to take care of it -- private companies could easily follow the model.

Of course, I see that all drivers in BC have to have ICBC, but it seems like the net effect on risk would be minimal -- the pool is larger, sure, but that still doesn't add up. Can somebody clarify why this isn't the default paradigm for US insurers (or at least mutuals)? Seems like if it turned out discrimination wasn't profitable, you'd have no problems.

I just finished a semester course on "Intro to Risk Management and Insurance. I'll have to e-mail the prof and see how he thinks it works.
posted by SuperNova at 5:05 PM on December 13, 2005

It may be because bad drivers can be severely penalized, and have no option to duck and run to another insurer. Also, ICBC makes very good investments with its profits.

Here's another kicker: ICBC pays to improve our roads.

Seriously, they spend money to reduce accident rates. They pay to have dangerous intersections redesigned, or for roundabouts, or red-light cameras, whatever it takes to reduce the cost of accidents.

Cool note on red-light cameras in BC: first, the money generated by them is used only to maintain and expand the system. The fines do not end up in general revenue. Second, there is no financial connection between the cameras and the municipalities nor the police detachment, ergo no incentive for towns to abuse red-light cameras by dropping the yellow light signal to an unreasonably short time period. Third, they ignore a lot of infractions, ie. running a right-hand turn on red without stopping. All they really want is to nail drivers who engage in the highest-risk, highest-accident behaviours.

The ICBC automobile insurance system is, without a doubt, one of the world's most highly-sophisticated, forward-thinking, and fundamentally fair systems.
posted by five fresh fish at 10:32 AM on December 14, 2005