Over in wellinghall's LJ... what an interesting question!* I'm not… - Sally's Journal
Over in wellinghall's LJ
... what an interesting question!* I'm not sure I know the answer.
*Is it reasonable for women to be charged less than men for life insurance? Is it reasonable for women to be charged more than men for an annuity or pension? Yes, if it's backed up by statistics, or no, even if it's backed up by statistics...
|Date:||June 16th, 2008 09:27 am (UTC)|| |
This cuts right to one of my fundamental concerns with statistics that make me worry that it's all arbitrary guesswork rather than principled science. (The other is "how do Bayesians work out the correct prior?".)
Given a division of a population into subsections, you can do statistical analysis to determine whether some property of that population is correlated with the division. In non-Bayesian terms (I still haven't quite managed to throw off my A-level training), you do this by determining that there is a very small chance of the property being this unbalanced between divisions by pure chance, and that therefore you have to believe that either a one-in-(say)-100 statistical anomaly has taken place or that there really is a correlation.
This is fine if you only have one division and it's been picked for you by some external constraint: in that situation the logic makes sense. But if you have to start by thinking up your division in the first place, it's iffier. If you statistically analyse your population by race, sex, social class, inside leg measurement, star sign, first three bits of MD5 hash of their DNA profile and so on, then after you've tried a couple of hundred different divisions you're almost sure to have found one which yields what looks like a statistically significant correlation to your property. Does that mean it really is correlated, in the sense that there's any above-average chance of the correlation persisting in future additions to the same population? Not necessarily: it just proves that if you stare hard enough at a dataset you're sure to eventually find a vegetable that looks like Jesus. As it were.
Then the other question is that of justice: if you're advantaging people differently depending on the apparent correlation you've found, is that just? And this also comes back to the question of what your divisions ought to be. Should I be lumped in with the category "men" for my car insurance premium calculation, or should I be lumped in with the category "people who drive small pootly cars and don't go roaring down motorways at 100mph all the time"? My intuition says that the question of which is more just might be largely orthogonal to the question of which has a statistically stronger correlation to road safety.
> The other is "how do Bayesians work out the correct prior?"
They don't. They choose a conjugate prior* and, in many case, guess the distribution parameters or fit them to a training set.
* i.e. a distribution where P(A|B)P(B) is integrable analytically.
I suppose the question boils down to whether we want these things to act as individual insurance or as redistribution between individuals? If we just want it to act as individual insurance then it's reasonable to charge a different price based upon anything which might be correlated with the risk being insured. If we want it to redistribute then it's reasonable to force insurers to charge the same fee to everyone to redistribute fro the low risk to the high risk.
But that would lead to the same price for life insurance being charged to both a centenarian and a fit 20 year old. Which may be what you want; but you've got to be sure it's what you want.
My thoughts on this one always lead me to coming down on the side of life insurance companies being able to make as accurate an assessment of someone's chances as possible. Forcing them to disregard information obviously works counter to this.
If you are less accurate than you could be, people come in two varieties: Those paying more than they ought, who may well realise this, and stop - and those paying less than they ought, who will eventually stop being subsidised, unless we rely on some sort of inertia.
Attempting to make life fair is an entirely reasonable goal, but forcing insurance companies to jump through hoops in order to use information they already have is not the way to go about it.
But then I sometimes think it is reasonable to force insurance companies to not use some information if insurance sompanies using some information has very negative unintended consequences.
For example, for a while I think some life insurance companies would ask applicants whether they'd ever been tested for HIV and would charge them more/not insure them if they had. The reason was that statistically people who get tested for HIV tend to be people who are more likely to get infected with HIV at some point because most people would only get tested if they'd done something that involved a risk of infection* and are more likely to do it again. This approach would sort of be fair enough if it weren't for the fact that knowing that insurance companies took this into account made people less likely to get tested and this was a Bad Thing because people who know that they have HIV can start treatment earlier and are less likely to infect other people. So in that case it was a lot better all around to stop the insurace companies asking the question.
*Yes there are lots of 'good' 'responsible' people who go who regular tests despite practising safer sex, just in case, but they're outnumbered by the people who get tested because they engage in risky behaviour.
it is reasonable for an insurance company etc to decides its own terms for what it thinks it can afford to offer. If they didn't want to insure women at all, that would be their perogative.
It's a free world, and I don't think we have a 'right' to either insurance or pensions.
So yes, it's reasonable to follow the stats to deduce what they can afford to offer to whom.
Having said that I don't think it would be unreasonable to spread the load across both.
|Date:||June 16th, 2008 11:37 am (UTC)|| |
If they didn't want to insure women at all, that would be their perogative
That's the old "it's OK for a sausage seller to decide not to sell sausages to people in pink hats" argument. Which, when I agonised about it for ages, I decided that if one sausage seller has oddities then it's not worth getting the government involved, but if every sausage seller is refusing to sell sausages to people in pink hats and the people in pink hats need sausages, then Something Must Be Done TM. We might not have a 'right' to pensions, but if only men could get pensions that would be Evil Bad and Wrong, in my book.
As several people said, we seem to be approaching the divergence of two overlapping goals. For a while, insurance was a profitable business with only the most broad categorising of subjects, which was very convenient as the free market fills a need. But now we're discovering it doesn't quite work, and what's most profitable for an insurance company can be horribly unfair for people needing insurance. And we have to decide which goal we want.
|Date:||June 16th, 2008 01:46 pm (UTC)|| |
In the extreme, "most profitable" = "viable" - the alternative to unfairness won't be reducing the profits of insurance companies, it'll be state provision.
Actually, it's often quite reasonable for women to be charged less for life insurance (same lump sum payout, but a statistical probability that more monthly payments will be made), but the same amount for a pension, because of how pensions work.
Quite frequently, a pension paid to a married couple continues to be paid until the death of both partners - so that would be the same whether the pension-payer was male or female.
Also, pensions are funded partly or wholly by the interest earned on the stock market from the amount paid into the pension. Some of them will return the leftover starting pot as a death benefit, decreased if necessary depending on the amount paid out - in this type of pension, the total amount paid out would be identical no matter how long the pensioner lived. In either case, the amount paid out by the company is similar to (starting amount of pension + interest earned on it), no matter how long they've been paying out on it for.
So quite often lifespan is not actually relevant to (the amount of pension paid out - the amount of pension paid in), therefore women should not be charged extra for pensions. Does that make sense?
Only if the same benefit is paid to the widow/er as was paid to the original life. Often, only a lower level of benefit (eg 50% or 2/3) is so paid.
And "returning the leftover pot as death benefit" is pretty rare, and in any event the age of death still affects the present value of moneys to be paid out.
|Date:||June 16th, 2008 07:18 pm (UTC)|| |
Hmmmm. I think it's not reasonable to charge women more NI for state pensions (I do however think raising the retirement age is fair) - this is because we don't choose to contribute to the scheme, and payout is not really dependent on amount paid in (only on number-of-years paid, which is not quite the same), and anyway it's clearly a Socialist Scheme to Redistribute Money (and should do it better dammit!). And besides women do lots of unpayed work that benefits the state - like having kids; maybe the primary carer of a minor child (the person getting the child benefit) ought to be deemed to have paid their NI if they aren't working and paying it? That would be nice. (also persons receiving the whatever-it-is allowance you get if you look after your elderly parents/siblings/spice/etc).
On the other hand I think it is fairly reasonable to charge people more for insurance if they are more likely to need it (and, um, less per month if more months will be paid before it is needed). I think that if we want Socialised Insurance (take money from people as have it and give it those as don't but who need it) we should damn well have Socialised Insurance and not pussy foot about telling private companies what to do. I don't think it's especially unfair that Rich People who put more money into their pension get more pension; I don't think it's especially unfair that a person who is very ill gets more pension per month for their pension-savings than a person who is likely to live a long time (for one thing it might help the ill person get nicer care whilst they are alive)... I just think it's Not Nice that this means some people end up with very little pension.
Plus I think life insurance is a complete waste of time. But then I don't have any dependents, so maybe I'm biased.
For people with no dependents, life insurance (in the traditional sense) is a waste of time. Once you get dependents, it becomes really, really important.
|Date:||June 17th, 2008 07:01 am (UTC)|| |
Reasonable requires consistent
I'd like law to be consistent. If a company is allowed to charge me more for something, for being a man, I think it should be allowed to pay me more for something, for being a man (either assuming statistical evidence for both or for neither).
If a company isn't allowed to pay me more for something then I don't think it should be allowed to charge me more for something.
Incidentally who else suspects that if the statistics had said men were safer drivers then this pricing practice would have been outlawed decades ago?