What are likely effects of interference with market forces

Reference no: EM131209585

Despite the negative stereotype of ‘‘women drivers,'' women under age of 25 are, on average, noticeably better drivers than men under 25. Consequently insurance companies have been willing to offer young women insurance with a discount of 60 percent over what they charge young men. Similar discrimination applies on the life insurance market given that women are expected to live longer. Sex-based discrimination for auto and life insurance is extremely controversial. Many people have argued that sex-based rates constitute unfair discrimination. After all some men live longer than some women, and there are some men who are better drivers than some women. In response several US states have laws mandating ‘‘unisex'' insurance ratings.

a. What are the likely effects of such interference with the market forces?

b. Should the government allow insurance companies to base life insurance rates on sex? What are the risks for women and for men who were paying very different rates? Who gains and who loses?

c. Should insurance companies be allowed to base automobile insurance rates on sex, age, and marital status? What are the consequences of having some groups paying much less than they would if rates were based on actuarial differences in accident rates across sexes and ages?

Reference no: EM131209585

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