Clarity is the Key Be Concerned About Insurance Pricing: Race and Racism



Discrimination is not allowed in today’s insurance market. Discrimination on the basis of race or religion, ethnicity, gender, sexual orientation, or any other factor that does not directly affect the risk of being insured, is not only unfair but also a bad business decision in today’s multicultural society.

Concerns have been raised over the use of credit-based scores, geography, home ownership, and motor vehicle records to set home and car insurance premiums. Critics claim that such data could lead to “proxy discrimination” where people of color are sometimes charged more for the same coverage than their neighbors. These tools are used by insurers to predict claims and match premiums with risk – thus preventing policyholders at lower risk from subsidizing those who are more high risk.

It is not difficult to understand the confusion surrounding insurance ratings. Complex models are used to calculate insurance rates. Actuaries must distinguish causal relationships from superficial correlations in order to properly align the prices of insurers with the risks they cover. They could lose their ability to honor policyholder claims if they make mistakes.

They must do all this while adhering to the laws and regulations in more than 50 U.S. jurisdictions. Insurers are one of the most highly regulated industries in the globe and have strong incentives to adhere to anti-discrimination laws.


CAS states that insurance pricing is a complex and intricate act. It’s critical for us to keep up with the most recent advances in how discrimination is defined, judged, and controlled as society’s knowledge of the issue evolves.


Insurance companies are acutely aware of the history and discrimination in financial services. It would be disingenuous for the industry to claim that all bias has been eliminated from the system. However, over the years the insurance industry has responded to concerns about fairness as well as equity. The unique position of actuaries and insurers is to help policymakers, corporate decision-makers, and the public to understand these inequalities and play a constructive part in policy discussion.