The house voted today on a pair of gender-related bills that generated a
debate full of passion, confusion and irony. I was in the majority on all
three of major votes, but split from some of my friends on two of them.
One of the bills, which passed, will require gender-blended pricing of
annuity contracts. In a simple annuity contract, a person (usually a
retiree), pays a substantial lump sum to an insurance company. The company,
in return, pays them back with an income for life. Since women live longer
than men, insurance companies charge them more than men for the same
annuity. The bill will require companies to blend pricing for men and
women, so that both pay the same prices. Although results will vary for
individuals, on average, men will subsidize women, lowering rates for women.
The other bill, which also passed, would also lower rates for women, by
relieving the Massachusetts Savings Bank Life Insurance company of an unique
statutory requirement for them to use gender-blended rates for term life
insurance. Since women live longer than men, other life insurance companies
charge them less than men — this will allow SBLI to do the same, lowering
their rates for women. Women will stop subsidizing men.
For some, the debate was about equality for women and they spoke in
passionate historical terms about the progress of civil rights. Members who
saw the issues primarily through this lens voted for the annuity bill and
against the life insurance bill, even though both bills lower rates for
women.
As passionate as I am about the principle of equality, I felt the equality
principle was misused in the debate. To me, equality means charging men and
women based on the same actuarial principles. Actuarial pricing favors
women buying life insurance and favors men buying annuities. There is
nothing unequal or unfair about that — both genders are receiving the same
treatment, even though the resulting prices are different.
I chose to support the annuities bill because we generally do not
differentiate based on gender or other immutable personal characteristics,
in our bedrock financial systems — compensation, pensions, social security,
health insurance, auto insurance. We keep things simple and view ourselves
as all in the same system together.
Noone would suggest that women should receive lower social security payments
than men with the same contribution history, even though they are likely to
live longer and so take more out of the system. Nor would anyone suggest
that we make different social security payments based on race or religion,
even though smart actuaries might be able to compute survival differences
based on these criteria. We keep things simple and avoid divisive
hairsplitting and by doing so, we increase social coherence.
Annuities are a class of financial instrument that may play an increasing
role for retirees as more and more people work for companies that lack a
defined benefit pension plan. At 65, hard working people may have a good
financial nestegg in a 401(k) or other savings vehicle and they may choose
to convert that nest-egg into an annual income resembling a pension by
purchasing an annuity.
So, I felt comfortable voting for the gender-neutral annuity bill on the
keep-things-simple-we-are-all-in-it-together principle. Yet, I voted
against an amendment to the life insurance bill which would have extended
gender-neutrality to term life insurance contracts. Arguably term life
insurance is a bedrock financial product that should be gender neutral and I
might vote for this concept in the future, but I felt that was out of order
in the current debate.
A complete restructuring of the life insurance market deserves some hearing
and discussion. Insurance rates would go up for women and down for men. Is
that what we want? What would the consequences be for Massachusetts
companies competing nationally? We would be the only the state other than
Montana to adopt this approach. It is probably the right approach, but
deserves a political process where all voices are heard before we move on
it.
I also voted for the bill which would relieve the Massachusetts SBLI from
the requirement of gender-blended rates for life insurance. Until after due
deliberation, we are prepared to subject all Massachusetts companies to
these rules, their seems to be no good reason to subject only this company
to the rule.
So, it was a difficult day, but one that I felt prepared for after
considerable input and reflection. Thank you to those among you who
communicated with me on these issues.