From Volume 87, Number 2 (January 2014)
Insurance companies are in the business of discrimination. Insurers attempt to segregate insureds into separate risk pools based on the differences in their risk profiles, first, so that different premiums can be charged to the different groups based on their differing risks and, second, to incentivize risk reduction by insureds. This is why we let insurers discriminate. There are limits, however, to the types of discrimination that are permissible for insurers. But what exactly are those limits and how are they justified? To answer these questions, this Article (a) articulates the leading fairness and efficiency arguments for and against limiting insurers’ ability to discriminate in their underwriting; (b) uses those arguments to identify a set of predictions as to what one would expect state antidiscrimination laws to look like; and (c) evaluates some of those predictions against a unique hand-collected dataset consisting of the laws regulating insurer risk classification in all fifty-one U.S. jurisdictions. Among our findings is that, contrary to the conventional wisdom, state insurance antidiscrimination laws vary a great deal: in substance and in the intensity of regulation, across lines of insurance, across policyholder characteristics, and across states. The Article also finds that, contrary to our own predictions, a surprising number of jurisdictions do not have any laws restricting insurers’ ability to discriminate on the basis of race, national origin, or religion.