What Is Unisex Legislation?
In the insurance industry, the term “unisex legislation” refers to laws and legal decisions that made it illegal for insurance companies to charge different rates to men and women within certain types of insurance. The term is mainly used in relation to the group insurance policies which companies offer to their employees.
- Unisex legislation are laws and legal decisions restricting the ability of insurance companies to set different insurance rates for men and women.
- The insurance industry has argued that such practices are reasonable if the gender differences are genuinely relevant for the purposes of assessing the likelihood of future claims.
- The main area in which we see the influence of unisex legislation is in employer-sponsored group health insurance plans.
How Unisex Legislation Works
To determine a reasonable premium, insurers consider various factors that would be relevant for predicting the likelihood of future claims. For example, in the case of health insurance, an insurer might look at the age of the insured person, as well as their lifestyle habits. Personal factors, such as their gender and ethnicity, might also be considered if those factors have been shown to be correlated with different health outcomes.
For this reason, it is common for men and women to receive different insurance premiums when shopping for health insurance. Women, for example, have longer average life expectancies than men, which might result in lower insurance premiums. Another example can be seen in automobile insurance, where men in general—and young men in particular—tend to pay higher insurance rates than women, due to being perceived as riskier drivers.
Some of these practices, however, have come under legal challenges. Unisex legislation states that all people, regardless of gender, must be treated the same by insurance companies when setting rates and product offerings. The state of Montana took the lead with unisex legislation, passing the first unisex law in the nation in 1985 which prevented insurance companies from using gender when establishing rates and benefits. Today, perhaps the most common area in which we see the influence of unisex legislation is in employer-sponsored group health plans. In these plans, the rates paid by men and women are typically the same, in order to comply with unisex legislation.
Real World Example of Unisex Legislation
An area of controversy when the law first passed was with life insurance policies, in which insurance companies were no longer allowed to use gender as a basis for setting premiums or benefits, just as the use of race, color, religion, marital status, and national origin were prohibited. The insurance companies argued that women were hurting themselves as life insurance policies typically cost less for women, given they outlive men on average. But the women counter-argued that men were receiving larger payouts on their policies.
One of the most complex areas of interpretation of unisex legislation today is seen in transgender cases. Many health plans still exclude coverage for a sex change or sex reassignment surgery. Depending on what future lawsuits may transpire, it may be the case that insurance companies will eventually be prohibited from excluding sex reassignment surgeries and other gender-related operations in this manner.