By: Patricia McHugh Lambert, Esquire
With the end of the most recent Maryland General Assembly legislative session, insurers have certain expectations. They expect the change that comes with new insurance laws. They expect that there will be laws that impact coverage. (Consider SB 436/HB 1003, dealing with coordination of coverages for rental vehicles). They expect laws that impact litigation. (Consider SB 101 dealing with pre-litigation discovery of limits). They have even come to inspect new laws dealing with data breaches. (Consider SB 30 dealing with breaches). But sometimes legislation is passed that does not deal with insurance issues per se, but which still has a significant impact on insurance. The recently enacted legislation dealing with non-binary driver licenses may be one such new law.
The Maryland General Assembly enacted SB 196 and HB 421—measures that allow applicants for driver’s licenses to identify their gender as unspecified/other. Consequently, Maryland is moving away from a mandatory binary approach to a non-binary approach to driver licenses. While it is true that this new option has no “direct” impact on insurers, insurers would be wise to think about such legislation and to think about it now. This legislation could—and likely will—impact insurers’ marketing, underwriting and rating strategies.
Insurance has often been gendered based. The gathering of statistics regarding motor vehicle insurance probably started in 1898 with the issuance of the first motor vehicle insurance policy to Truman J. Martin, continued with the passage of mandatory motor vehicle insurance (Massachusetts was the first in 1927), and exists to present day. Likely starting with the first issuance of a driver’s license to a female (Anne French in 1900), statistics have been kept as to the differences between male and female drivers.
According to some recent reports, men are 245 percent more likely to be involved in a fatal motor vehicle accident than women (Insurance Institute for Highway Safety); 113.9 million women and 111.4 million men have drivers licenses (Federal Highway Administration); and men on average drive approximately 40 percent more miles per year than women (Federal Highway Administration). Driving statistics seem, then, to generally be collected on a binary basis—where drivers are listed as either male or female. The question, now, is what will happen to statistical modeling when driver licenses are no longer binary.
This is not a simple question or a question that has a simple answer. Insurers in Maryland (and other states) will need to consider how non-binary driver licenses could impact their businesses, underwriting, and marketing. For example, how will insurers change their applications for insurance? Presently, many—if not most—insurers require an applicant to describe themselves as male or female. What happens if someone in an insurance producer’s office indicates that neither designation fits? How will agents and underwriters be trained?
Some guidance may be found from the practices of other states. When the governor signed SB 196 / HB 421 into law, Maryland joined Arkansas, California, Colorado, Indiana, Maine, Minnesota, Nevada, Oregon, Utah, Vermont, and the District of Columbia in being one of the twelve jurisdictions that allow non-binary gender options on driver’s licenses. Notably, all of these jurisdictions established their non-binary driver’s license legislation within the past three years.[1] Thus, while the majority of states still conform to male/female designations, there has been a recent spike in non-binary legislation which suggests a shift in political and public discourse. The states which have shifted to non-binary designations have a variety of approaches to rate setting, with some outlawing gender based premiums. But considering the new legislation in Maryland, is it time for an insurer to consider formulating rate-calculations which no longer rely on gender? If not, insurers will need to be able to defend the soundness of their actuarial practices.
The non-binary driver’s license legislation even impacts issues of marketing. A portion of the public has long opposed gender based rating practices. Another portion of the public is opposed to any practice that would seem to be discriminatory to the transgendered community. Still others of the public oppose the fact that non-binary designations are allowed at all. With these issues swirling around, insurers will need to decide how they will deal with the non-binary issues from a marketing standpoint.
Maryland’s new legislation may even be a catalyst to future legislative or regulatory reforms. For example, after California allowed non-binary designations on driver’s licenses, the state legislature generally banned the use of gender in pricing auto insurance. Other states have eliminated gender based pricing for a variety of reasons so that there is more general unisex pricing in those states. As the number of jurisdictions imposing bans and restrictions on gender-based calculations continues to increase, Maryland insurers may need to consider alternative strategies to gender based rating.
Ultimately, what Maryland insurers should do is, of course, a matter of business strategy supported by sound actuarial practices. But time may be of the essence, and insurers should not allow themselves to be caught off guard by this new non-binary driver’s license law. A wise insurer will need to consider the issue and adopt a reasoned approach accounting for the various implications this legislation may have on their business practices, underwriting guidelines, and marketing strategies. Insurers simply cannot afford to ignore this new legislation.
Ms. Lambert has over 25 years of experience in handling complex commercial litigation and insurance matters. Ms. Lambert has worked on national class actions, significant litigation and regulatory matters for Fortune 500 companies. She has also assisted small and mid-sized companies and business executives with contract, real estate and commercial disputes that needed to be resolved quickly and efficiently. Ms. Lambert is best known as an attorney who knows the field of insurance. She has represented insurers, policyholders, and insurance producers in disputes both in court and before the Maryland Insurance Administration. She can be contacted by phone at 410-339-6759 or email at mailto:plambert@pklaw.com.
[1] Arkansas residents have been able to get an “X” on their state driver’s licenses since 2010, but this ability was virtually unknown to the public until it was publicly reported by an advocacy group in 2018.
