[fighterpilot]

Suppose for argument's sake that it is fairly accurate.

What would then be the argument that we shouldn't use this information to, say, set insurance premiums, when we already happily accept the use of other prejudicial information such as age and gender to do so?

[wearywanderer]

> we already happily accept the use of other prejudicial information

False premise, I do not happily accept this. I begrudgingly accept it, only because I don't think I have the power to change it. But by speaking out against the automation of prejudice in other domains before those systems have become mainstream, I hope I might make a difference.

I think the cost of car insurance should be a function of your past driving history and the price of your car (if the insurance policy covers damage to your car.) Pulling race, gender, sex or age into the equation might make insurance companies more profitable, but I do not like it.

[drdeca]

Why?

In the (theoretical, unrealistic) limit of perfect competition, supposing that the profit margin is the same in both cases, wouldn’t the average purchaser of car insurance would be better off if these things were taken into account than if they weren’t?

Ok, maybe you don’t think averages are the thing to care about.

Uh,

Ok so if you draw the demand curves (not straight lines) for car insurance for both types of people (those born with and without street racing symbols on their irises) And we consider the cases where the insurance companies can set a price that depends on the type, uhh, Well,

Hm, ok yeah I guess those with racing-eyes get a worse deal in the case that they can be discriminated against. (Here I am using “discriminated against” in what is meant to be a way that doesn’t make a value judgment)

But, the point of insurance is not to produce equal outcomes between people. The point of insurance is to reduce the variance in outcomes for each person with as small as possible a worsening of the average outcome for that person. If what you are doing is trying to make outcomes equal between groups, what you are doing is no longer just insurance, but a subsidy.

Is it really more efficient to have the prices be required to be the same regardless of racing-eyes, than it would be to just directly tax those with non-racing-eyes to subsidize those with non-racing-eyes?

Maybe. I haven’t done the math.

[fighterpilot]

> profit margin is the same in both cases

Profit margins would actually be bigger in the case of more profiling. Absent profiling, insurers open themselves up to much more negative selection (e.g. old people being more likely to purchase cheap health insurance that's subsidised by the young), which has the effect of increasing premiums for the customer, decreasing margins for the insurer and chasing away the customers that are the least likely to need to make a claim.

[drdeca]

Does this hold in the perfect competition limit? Doesn’t the perfect competition limit have profit margins of approximately zero?

[pjc50]

Who's "we"? An outcome of EU gender equality law was that car insurance premiums may no longer depend on gender even though it is correlated with risk.