How Do Unisex Rating Regulations Affect Gender Differences in Insurance Premiums?

As of 21 December 2012, the use of gender as an insurance rating category is prohibited in the EU. Any remaining pricing disparities between men and women will now be traced back to the reasonable pricing of characteristics that happen to differ between the groups or to the pricing of characteristics that differ between sexes in a way that proxies for gender. Using data from an automobile insurer, we analyse how the standard industry approach of simply omitting gender from the pricing formula, which allows for proxy effects, differs from the benchmark for what prices would look like if direct gender effects were removed and other variables did not adjust as proxies. We find that the standard industry approach will likely be influenced by proxy effects for younger and older drivers. Our method can simply be applied to almost any setting where a regulator is considering a uniform pricing reform.