Fairness and Equality in Insurance Classification^*

Authors: Thiery, Yves; Van Schoubroeck, Caroline

Source: The Geneva Papers on Risk and Insurance - Issues and Practice, Volume 31, Number 2, April 2006 , pp. 190-211(22)

Publisher: Palgrave Macmillan

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Abstract:

Insurance is to a large extent based on risk selection and classification. Legislators however are inclined to impose restrictions to these differentiations by banning those that are considered to be “discriminatory”. Risk selection and risk classification are not disallowed by law, but each such decision requires a well-funded, that is, fair justification. The conditions for reaching a fair insurance-differentiation scheme could be clarified by bridging the apparent conflict between an “individualistic” human rights approach and an insurance “group” approach to equality. Therefore, a number of considerations concerning the notion of subsidy-aversion should be taken into account in the legal justification of unequal treatment. These considerations concern the notion of controllability of risks, the (im)possibility of establishing a causal relation between risk variables and the risk itself, scepticism of adverse selection in case where price-inelastic markets are concerned and the influence of tracing costs on the choice of risk variables.The Geneva Papers (2006) 31, 190–211. doi:10.1057/palgrave.gpp.2510078

Document Type: Research article

DOI: http://dx.doi.org/10.1057/palgrave.gpp.2510078

Affiliations: 1: aK.U. Leuven University, Tiensestraat 41, Leuven B-3000, Belgium., Email: yves.thiery@law.kuleuven.be

Publication date: 2006-04-01