For decades, drivers who didn’t identify themselves as male or female — known as nonbinary — have faced a problem: When applying for car insurance, they were presented with a form that asked them to identify their gender. Aside from the difficulty of feeling like their genders were not affirmed, there was also a chance that the gender they did select would affect the cost of their monthly premiums.
Historically, auto insurers considered younger women to be safer drivers than younger men, who have a higher risk of accidents, speeding and DUI convictions. Because of that, younger women tend to be charged lower premiums than younger men. Then some U.S. states began to recognize the legal basis for gender identities beyond male and female, and that left auto insurers with a problem. What should they charge someone who identifies as nonbinary? How do you accurately rate the risk factors of a group whose identity has just begun to be recognized?
The recent rise in state legislation acknowledging and accommodating people identifying as nonbinary has required insurers to respond. Many states also now allow gender X designations on birth certificates. Here’s a closer look at some of the issues at play:
No proof required: As of the date of this article, there are 20 states in which people can change the gender on their driver’s licenses without documentation.
Documentation needed: In states like Arizona, Florida and Idaho, documentation such as a signed letter from a licensed doctor or mental health professional, is required to get a gender-neutral driver’s license. In Utah, that documentation means showing a passport or birth certificate with a changed gender.
Form required: Some states may not require people to provide certification of their gender, but will require them to fill out a form. Illinois has reported that they will start offering options in 2024 for nonbinary and transgender people, who will just have to fill out a Gender Designation Change Form.
Gender banned as rating factor: In six states — California, Hawaii, Massachusetts, Michigan, Pennsylvania and North Carolina — gender is not allowed to be used as a rating factor for auto insurance. This leaves auto insurers working to figure out other ways to compare risks that don’t include gender, both for these states and any states that may adopt similar legislation in the future.
Gender allowed as rating factor with documentation: In Oregon, which was the first state where auto insurers were required to provide a gender non-specified option for customers applying for insurance, failure to allow for gender X may be viewed as discriminatory.
Gender, along with the driver’s age and marital status, are typically addressed in personal auto class plans. These class plans are developed by actuaries based on significant historical experience. They help insurers set rates for people who want car insurance.
But the debate about gender has been around for a long time. In 1985, Montana passed a law requiring that insurers offer the same insurance to everyone, regardless of gender. Years later, in a 2021 legislative session, Montana changed the law to allow gender to be reflected in auto insurance premiums.
During the 1970s, there were calls for ‘unisex car insurance,’ rather than accommodating nonbinary individuals. But the demand for auto insurance that does not factor in gender has remained consistent over the years. The challenge is that there isn’t sufficient data on nonbinary people to establish a rate based solely on that population. Because of all this, applying for auto insurance can be a complicated process for nonbinary people and insurance companies alike and can even result in nonbinary people being turned away.
To solve this, insurers could choose to ignore gender as a rating factor, as they are required in certain states to do so. This might mean women will end up paying premiums similar to men for insurance, which is what happened for female drivers in California. Some states, which offer unisex coverage, might require insurers to take the average of male and female rates and apply them to nonbinary applicants.
Insurers may also choose to focus on alternate methods of assessing risks, like driving records and telematics, and abandon gender entirely. Updating a class plan means reviewing what each state is saying about how these risks should be treated and then fully evaluating how to measure risks accordingly.
If insurers pursue a rating-factor solution for nonbinary drivers, they may need to look at robust loss experience data from across the industry. That data could eventually help develop a gender-neutral driving risk baseline, providing insurers with more accurate data on how safe nonbinary drivers tend to be and how to price their auto insurance, while ensuring that rating factors accurately reflect the diverse body of people buying car insurance today.
Frank Gribbon (Francis.Gribbon@verisk.com) is the director of personal auto actuarial products at Verisk and a fellow of the Casualty Actuarial Society.