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Introduction
The issues of gender discrimination have characterised various aspects of human society. In this respect, it has been noted that elements of gender discrimination have been noted in the insurance industry. When the risks to be insured are classified based on an individual’s sex, then this is what is called gender discrimination in the insurance industry. In the past, insurance companies have engaged in gender discrimination in the classification, acceptance and rating of risks. This has been based on demographic characteristics associated with the male and female gender. For instance, there is a widespread belief that women outlive men in most instances. Therefore, the life insurance for females is lower compared to that of males. Also, the female fraternity pays lower pension payments compared to their male counterpart. This is supported by the belief that females are likely to live longer than males and thus contribute to the insurance scheme for an extended period. This trend has been changing in the recent past with stakeholders calling for a halt in the use of sex while classifying risks. This paper provides an in-depth analysis of the concept of gender discrimination and insurance in the world.
Gender discrimination and insurance
Insurance companies employ various factors in determining the prices charged for their various packages. The aspects considered while pricing packages include age, gender, and where the individuals reside. For every variable, the insurers determine the possibility of someone who fits the profile making a claim. When there is a high likelihood of an individual making a claim, the individual is deemed to pay exorbitantly for the cover (Anker, para 6-8).
Gender has been noted to influence the pricing of various insurance coverage plans available. In relation to car insurance, young men are likely to pay more compared to their female counterparts. This is because it is believed that young men stand a higher chance to be involved in accidents than young women. Also, it has been observed that men pay higher compared to women in term life insurance. This is because men tend to die earlier compared to women. On the other hand, women tend to pay more than men for health insurance. This is because women stand a higher chance to visit a hospital compared to men. With respect to annuities, the males get significant income as they stand a chance to die earlier compared to women. Therefore, the insurance companies are not required to pay out for an extended period (Anker, para 10).
The world has continued to witness incidences of gender discrimination in insurance schemes. Therefore, this is not a new concept as insurance companies have used sex differences to gauge the risks. During the last two decades of the 20th century, issues of gender rating and discrimination in the corridors of justice were common. In the year 1992, a case was brought before a Canadian court by a 20-year-old man. In the case, Zurich Insurance Company v Ontario (Human Rights Commission), the complainant argued that the insurance firm was discriminating against him. This is because the company required him to pay higher insurance rates compared to the rates paid by women. His assertions were that the insurance company had discriminated against him on the basis of age, gender, as well as marital status. The young man lost his claim by a majority verdict in which three of the five judges ruled in favour of the insurance company (Vivian, para 2).
Adam Smith is considered to be the pioneer of modern-day economics. He argued that an individual “who pays no more than the cost of claims and expenses of handling insurance, pays no more than the real value of the risk, or the lowest price at which he can reasonably expect to insure it” (Vivian, para 5). It can be observed that Adam Smith provided a basis on which insurance pricing is made. In order to attain the low price as stipulated by Adam Smith, the insurance policies are sold based on the aspects of a free market. The free market has been hailed for its ability to price insurance products in an appropriate manner. In this case, no one will complain about being overcharged for the insurance products on offer (Vivian, para 5).
Insurance discrimination based on gender in the United States
Cases of gender discrimination in insurance are common in various places of the world. The National Women’s Law Center noted that most health insurance companies charge females more than what they charge men. This means that females end up spending close to one billion dollars on health insurance each year. The report further notes that even though the insurance companies are aware of this discrimination, nothing has been done to correct the mess (Press TV, para 1-2).
In the United States, there are states that have outlawed the discrimination practiced by insurance companies based on gender. Nonetheless, there are other states that have not taken any action to eliminate the practice. The stage is set to change when the Affordable Care Act will become fully operational in the year 2014. This will ensure that gender-based discrimination in the health insurance industry has been outlawed (Press TV, para 3).
Most health insurance companies practice gender rating in which women are charged premiums that are different from those charged to men. This leads to considerably high rates being charged to women across the country. As noted earlier, some states in the US have banned the aspect of gender discrimination in health insurance. However, “the vast majority, 92%, of best-selling plans gender rate, for example, charging 40-year-old women more than 40-year-old men for coverage. Only 3% of these plans cover maternity services” (Common Dreams, para 4).
Estimates are often based on the premium being run in adverts and the number of females in the insurance market. These estimates indicate that gender rating is a costly affair to the women’s fraternity. Approximately one billion dollars are spent by women in insurance premiums each year. It has been observed that 25 to 40-year-old women are charged exorbitantly compared to men for similar insurance coverage. In essence, women end up being charged at least thirty percent or more than men for the same coverage. This is not inclusive of the maternity coverage (Press TV, para 6).
The incident where women are charged more for their health insurance compared to men leads to women spending more money on insurance compared to men. In South Dakota, there is a plan that charges each woman slightly over $1250 more per year compared to what is charged to each man in a similar age bracket. On the other hand, in Florida, females are required to pay about $1140 in excess yearly in insurance premiums. The disparities might look negligible, but there is no doubt that they have a far-reaching impact on women in the long term. In addition, there are instances where women need to dip into their pockets to supplement the maternity coverage (Common Dreams, para 6).
The United States has witnessed major incidences of gender discrimination in health care insurance. It can be observed that in some states within the United States, there are incidences where women who are not smokers pay a higher premium compared to the men who smoke. In this respect, it was found that over 50% of established insurance plans had higher charges for women who did not smoke compared to the men who smoke in the same age bracket (Press TV, para 8).
Provision of maternity coverage is critical to the women fraternity. In the United States, only nine states have mandated the insurers to engage in the provision of maternity coverage. It has been noted that, in those states where maternity coverage is not a requirement, most health plans do not provide maternity coverage. In fact, it was found out that close to 95% of the health plans did not have such coverage in their packages for women aged thirty. Notably, there was no insurance plan covering maternity services in twenty-five states (Press TV, para 9).
Women have further been subjected to numerous tribulations in insurance coverage. Women who are victims of domestic violence and those who have undergone a Caesarean section stand to be denied coverage. This is due to what the insurance providers call “pre-existing conditions” (Press TV, para 10). It can be noted that women have been subjected to gender discrimination in the health insurance sector for a long. However, the future looks bright following the enactment of the Affordable Care Act. This Act will be applied across the country and it will eliminate the aspect of gender rating in the provision of insurance cover. According to the Affordable Care Act, all insurance plans on the individual market must engage in the provision of maternity coverage. The Act also discourages sex discrimination in health insurance plans being funded by the federal government (Press TV, para 11).
The issue of gender discrimination and insurance in Europe
Incidents of gender discrimination in the insurance industry are a common feature in various parts of the world including Europe. Nonetheless, the European Union’s Court of Justice has made a major ruling that is bound to change the industry. In its ruling, the court observed that insurance companies should not charge different rates based on gender. The court noted that gender rating was prevalent among the insurance providers, and this amounted to discrimination based on sex (Casert, para 1). The court ordered the new changes in the insurance industry to be operational by December of the year 2012. There are various insurance plans that will be affected including vehicle insurance, life insurance, as well as medical insurance among other plans. This is likely going to affect many individuals across Europe (Casert, para 2).
This ruling has been hailed in some quarters, but the insurance companies have been forced to accept the ruling reluctantly. Viviane Reding, who is a Commissioner with the EU Justice, noted “now clear that an insurance company must not distinguish between women and men; all customers must be treated equally” (Casert, para 3). The insurers argue that their way of pricing has been the best and fairest. They noted that the changes introduced by the court ruling will negatively affect the customers as they will be forced to pay an increased amount in premium across the board. Maggie Craig, the interim Director General of the Association of British Insurers noted: “the judgment ignores the fact that taking a person’s gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance” (Casert, para 6).
The ruling by the European Union’s Court of Justice is destined to case a major shift in the insurance industry. Notably, women who are below forty years of age are going to witness an increase in their car insurance premiums. This is because they were being charged less than men previously. The Association of British Insurers (ABI) notes that females under the age of twenty five will witness a 25 per cent increase in their motor insurance cover (Anker, para 2). ABI notes that, on average, women shall witness an increase of about 20 per cent in premiums for life insurance. Also, the annuity rates are going to decrease on the part of men by about 8 per cent. On the other hand, the annuity rates on the part of the women shall rise by about 6 per cent (Anker, para 3).
The general impact of this ruling is that gender equality is going to be observed while issuing insurance plans. In this case, as one gender loses the other stands to win. However, this might not be necessary by an equivalent margin. A good example can be observed in the motor vehicle insurance cover where the premiums for women are expected to increase while that of men is expected to go down (Anker, para 4).
Conclusion
Gender discrimination in the insurance industry has been widespread in the recent past. Nonetheless, a new dawn has been witnessed and this is bound to change. The element of gender rating has been the major aspect used by most insurance companies all over the globe. In the United States, the adoption of the Affordable Care Act is set to introduce major changes and bring equality in the provision of health insurance. Also to be noted, the ruling by the European Union’s Court of Justice is set to cause great ripples in the insurance industry. The gender rating can be said to be dependent on behaviour and biological factors. As for the motor vehicle insurance, the price was initially priced based on behaviour. This is because young males are considered as being at great risk to cause accidents and thus they pay an increased premium. On the other hand, other aspects of insurance such as annuity, life insurance, and health insurance are based on biological factors. In this case, the cost differences are based on the belief that women outlive men in most instances. The changes expected in the insurance industry are tremendous as they will lead to a shift from ordinary pricing. In this case, equality is going to be observed in the provision of insurance cover.
Works Cited
Anker, Guy. Insurance costs to soar as judges ban gender discrimination. 2011. Web.
Casert, Raf. EU Court Bans Insurance Sex Discrimination. 2011. Web.
Common Dreams. Report: Health Insurance Gender Discrimination Costs Women $1 Billion a Year. 2012. Web.
Press TV. Health care sex discrimination costs US women $1bn a year. 2012. Web.
Vivian, Robert W. Gender discrimination and insurance: Economists v Lawyers. 2011. Web.
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