Transgender Applicants Could Face Confusion When Purchasing Auto Insurance

Transgender Applicants Could Face Confusion When Purchasing Auto Insurance

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It's a well-known fact: Car insurance companies partly base rates on a policyholder's gender. That's because research has shown men and women tend to have different driving styles and pose different risks to the insurer. Younger men typically pay higher rates because they tend to be much riskier to insure.

To account for this risk, applicants must identify their gender when purchasing a car insurance policy. This can be a straightforward question for some, but transgender people could run into problems. While most auto insurers ask for "gender," what they're really looking for is "sex." Gender refers to a person's internal and social identity, while sex refers to biological traits.

For example, a person who's born male but identifies as female may mark "female" on their insurance application. All else being equal, they could be quoted a more affordable rate. However, if the person's sex is legally "male" — which is defined by the DMV as what's listed on a birth certificate — the insurer might adjust the premium when writing the final policy.

What can be done to remedy the confusion? If auto insurers changed the label on their applications from "gender" to "biological sex" — and specify that it refers to whatever's listed on the policyholder's birth certificate and driver's license — the question may become easier to answer.

Changing gender on a driver's license can be very hard in certain states

The process for changing gender on a driver's license varies with each state. Depending on where you live, you may be able to get it changed if a psychologist or physician vouches for your transition, or you may need to complete gender confirmation surgery.

A map showing in which states is it hard and easy to change gender on a driver's license

In 65% of states, it's easy to change gender on a license. New Jersey and Pennsylvania, for example, are considered "A+" states — they only require a physician, therapist, counselor or social worker to fill out a simple form. In "B+" states, such as New York, the forms can be a bit more complex and the professionals who can vouch for your transition are limited to a physician, psychologist or psychiatrist.

The 18 states graded a D or less, however, present the biggest problem for transgender drivers. These states will only change a driver's license after receiving proof of gender confirmation surgery. This type of surgery is rarely pursued, in large part because of its cost — upward of $40,000. For transgender people who forgo this surgery, it may be impossible to get their gender accurately reflected on their auto insurance policy.

Further complicating the issue is that in all 50 states, a license can only state "male" or "female." That means nonbinary drivers can't have their auto insurance policy reflect their gender identity. While 11 countries currently recognize a third gender, no state or federal legislation deals with nonbinary people in the United States.

What this all means

If a transgender or nonbinary person wishes to drive a car, they will need to apply for insurance and confront this confusing situation. A simple "sex at birth" question on application forms could be easier to answer, but a change is not likely to happen soon.

It would require cooperation between legislators, insurers and actuaries who would need to create a fair system of accounting for gender ambiguities in their policy-writing process. However, as the fight for transgender equality grows, the momentum for change may pick up.

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

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