Guy Thomas

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Gender discrimination and insurance, loss coverage

The EU's ban on gender discrimination in insurance from the end of 2012 will have costs as well as benefits. Neither banning nor allowing gender discrimination seems to me egregious public policy. I therefore regarded this area as a low priority for reform.

Be that as it may, the concept of loss coverage is relevant to understanding and measuring the effects of the ruling. Insurers and actuaries frequently claim that restrictions on discrimination will lead to adverse selection: that is, more insurance will be bought by the higher-risk gender, and less by the lower-risk gender, and the total number of policies sold may fall.

But this so-called 'adverse' selection is not necessarily adverse. A fall in numbers insured can be consistent with a higher number of losses compensated by insurance, if more of the 'right' people - that is, the higher risks - buy insurance.

In other words, a fall in numbers insured can be consistent with higher loss coverage.

More on gender discrimination in insurance:

More on loss coverage: