New push could end unisex pricing at SBLI

Life insurer says rule puts company at disadvantage

By Ted Siefer
Globe Correspondent / May 20, 2010

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The Savings Bank Life Insurance company is proud of its distinctive history. It was founded in 1907 by future Supreme Court Justice Louis Brandeis to provide affordable life insurance to the working masses. It’s now the largest policy writer in Massachusetts, with a growing presence nationally.

But in one aspect, SBLI wants to be a little less distinct.

In 1990, the Massachusetts Legislature prohibited SBLI from considering gender in calculating premiums, making it the only life insurer in the state — and among the few in the country— required to be gender neutral when setting rates. This puts it at a disadvantage with competitors, which can offer women lower rates because, statistically, they live longer than men, and so would pay premiums over a longer period of time.

“On a long-term basis, this is not sustainable,’’ said Robert Sheridan, chief executive of the Woburn-based company. “We can’t be the oddball, the outlier. If this continues, we need to look at options in terms of relocation.’’

Since 1990, SBLI has aggressively expanded nationally, yet is bound by the unisex pricing policy in every state where it issues policies.

Because it was created by an act of the Legislature, SBLI must ask state lawmakers for changes to its business practices. Yesterday, the Massachusetts House overwhelmingly supported SBLI’s request to strike the unisex pricing provision. SBLI had won a similar vote in the House two years ago that was ultimately vetoed by Governor Deval Patrick, but yesterday’s result was by a wider margin.

If the measure becomes law, SBLI said, it would lower rates it charges women, not increase premiums for men.

SBLI’s request for fairness has provoked a larger debate on Beacon Hill about discrimination in insurance rates. Opponents said the solution to SBLI’s problem is not to let it treat one group of customers more favorably than another, but rather to require all insurers to treat men and women equally.

That’s the line Patrick has advanced. In his veto in 2008, he said the Legislature should instead bar all life insurance companies from using gender in setting rates. SBLI, Patrick said, should be an exemplar.

“It is appropriate that the state-created insurance company is a model of non-discrimination and fairness,’’ Patrick wrote then.

This proposal has been a nonstarter on Beacon Hill. House leaders yesterday refused to consider an amendment that would subject all life insurers to gender restrictions, and lawmakers rejected a similar measure in 2008.

The amendment yesterday was filed by state Representative Ruth Balser, Democrat of Newton, who opposes gender discrimination in insurance.

“There are actuarial differences between white and black people and Jews and Christians,’’ Balser said. “It’s illegal to use those categories. I think gender should be illegal, too.’’

Massachusetts bars the consideration of gender in setting auto insurance rates, and last year prohibited gender in pricing annuities, too. The state had already barred the practice in health insurance, where because of maternity care, for example, women could face higher rates. The national health care law passed by Congress this year imposed a similar ban.

A broader ban involving life insurance policies has waxed and waned. In 1988, the state’s insurance commissioner imposed a gender-neutral pricing policy on life insurance companies, and then two years later state legislators put the restriction in SBLI’s new charter. That charter allowed SBLI to function as a stock-issuing commercial insurance company and set the stage for its future growth.

Then in 1991 the state’s highest court struck down the industrywide ban, ruling the insurance commissioner did not have the authority to impose it. That left SBLI as the only life insurer operating under a unisex pricing scheme.

It’s easy to see why SBLI feels constrained. The company sells in 38 states, where it must compete with insurers that are free to offer gender-based rates, and it plans to continue its national expansion. Women represent a growing share of the life insurance market — 45 percent of new policies, according to industry figures for 2009. Meanwhile, SBLI says only 12 percent of its policies went to women last year.

The bill now moves on to the state Senate, where passage again is expected. And again, the governor has hinted at a veto.

“The governor would like to see a bill that is consistent with the fundamental principles that have made the Commonwealth a national leader in promoting equality and fairness,’’ a Patrick spokeswoman said.