Discussing segmented pricing policies in insurance premiums: Fairness vs. discrimination

Is it fair for car insurance companies to consider gender or age when setting premiums?

The discussion of fairness in pricing programs for any service organization, including insurance companies, airlines, hotels, and restaurants, is always challenging. At first glance, "tiered pricing policies" based on a customer's gender, age, occupation (e.g., first responder, U.S. military, retired), or educational status (e.g., in college) may appear discriminatory. Perhaps, it is odd to fathom that pricing policies may not be the same for all customers across-the-board and that prices may consider customers' demographic characteristics. However, variable prices have transpired in service industries for some time and customers traditionally receive monetary discounts for "bundling" services, first-responder status, age, and even mobile application usage.

To answer this question regarding fairness, I will say that it is as long as the pricing policies are made available to all customers in a manner that is easy to obtain (e.g., located on an organization's website) and easy to understand (e.g., readable font size and no jargon). Additionally, insurance companies should offer an unbiased explanation to customers as to why pricing options differ (e.g., state transportation accident guidelines).

Do you think car insurance companies are fair to college students?

As for addressing the question as to whether car insurance companies are fair to college students, once again, this depends on an organization's transparency with its tiered pricing policies. As long as an insurance company is transparent to its current or potential customers, then tiered pricing policies are indeed fair.

Perhaps, insurance companies would win accolades among at-risk customers if they provided periods of "probation," and a means by which customers with proven driving records can obtain financial discounts. For example, my insurance company provides me with monetary discounts based on a mobile application that monitors my speed, phone usage, and driving techniques, such as making a sudden stop. I have actually received discounted premiums based on my unique driving patterns.

To summarize, yes, tiered pricing policies are fair, as long as they are transparent, easily disseminated to current and potential customers, and easy to understand.

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