In April 2018, the Oregon Division of Financial Regulation issued a regulatory bulletin prescribing that auto insurers using sex or gender as a factor in setting rates must accommodate consumers who designate their sex as neither male nor female on their driver's licenses – or else be in violation of the Oregon Insurance Code for unfair discrimination.
Regulatory Trends and Context
State laws have begun to recognize individuals who identify their sex or gender outside of strictly “male” or “female.” In the past year, some states have passed laws requiring that personal identification documents, such as driver’s licenses and birth certificates, provide individuals with three options in selecting their sex or gender: (1) Male; (2) Female; or (3) Non-specified. In June 2017, Oregon became the first state to allow individuals to identify their sex as “M,” “F” or “X” on their driver’s licenses and state identification cards. A handful of other jurisdictions have followed, as California, the District of Columbia, New York, Vermont and Washington have enacted, or are in the process of enacting, similar laws.
We are beginning to see how these new state laws could impact insurance regulation. States generally prohibit “unfair discrimination” in providing insurance coverage, but it varies by state whether such prohibitions expressly ban unfair discrimination in performing certain actions, such as setting rates, or based on certain characteristics, such as sex or gender. Despite state differences, using sex as a factor in setting rates has been a controversial topic in its own right. Now auto insurers are receiving concrete clues of how new laws recognizing three options for identifying sex or gender could affect the industry.
The Oregon Bulletin
The Oregon bulletin requires auto insurers to accommodate consumers who designate their sex as not-specified on their driver’s licenses. See Or. Bull. 2018-3 (April 16, 2018). The bulletin explains that failing to accommodate such consumers constitutes unfair discrimination, an act prohibited under the unfair trade practices provisions in the Oregon Insurance Code. The bulletin requires that auto insurers who ask applicants to indicate sex or gender on application forms “must allow the applicant to accurately indicate their official sex or gender designation on file with the DMV.” If not, the forms will be disapproved. Additionally, insurers that use sex as part of their rating plans “must file rates for individuals who indicate their sex as not-specified.” These rate and form filings must be made effective for policies issued or renewed after January 1, 2019. The bulletin also addresses interim compliance.
Larger Impact and What We’re Watching
The Oregon bulletin makes clear that insurers will be impacted by states’ recognition of a third option for identifying sex or gender. Additional effects outside the four corners of the bulletin are possible down the line:
The Oregon bulletin reaches only auto insurers, so the industry will closely watch whether directives for health and life insurers follow.
Insurers may need to consider processes for updating insurance documents, to ensure that such documents are consistent with any insureds' newly issued driver's licenses or other personal identification documents. This concern may mostly impact health insurers, if providers require that the information on a state identification card match the information on an insurance card in order to accept the insurance.
Any issue like this under the broader area of “risk classification” immediately raises issues about Big Data and artificial intelligence. Will regulators be watching for gender identity being reflected through higher tech means than checking a box on a form?
Oregon has staked out ground on this emerging regulatory issue. We’ll be watching the direction along with all insurance industry sectors.