Looking Beyond Sex

Why actuaries should consider gender vs. sex-based ratings Erin Sheriff

Photo: Shutterstock.com/visivastudio

I grew up on wheels. If you knew me when I was small, you would have found me either on a skateboard or roller blades whenever I wasn’t in school. My wheels turned into a moped at age 14, and a motorcycle in college. With age, I’ve moved to four wheels, but I still enjoy the friendly competition with other drivers as we all “race” home from work each night.

A few more things about me: I played soccer and professional football. I’ve flown a helicopter and jumped out of an airplane. I regularly climb on my two-story roof to clean out the gutters. I’m also a single working adult, responsible for my own financial decisions. I’ve never been, nor will I ever be, pregnant.

If you, as an actuary, were trying to predict my mortality, how accurate would my female sex marker make your prediction? I don’t fit well into female stereotypes, and I’m guessing my actual mortality will reflect that. But what if I could express that difference by sharing that my gender doesn’t fit into the cultural expectations of a typical female in the United States?

Defining Gender

Gender is a social construct. It’s a classification based on cultural differences rather than biological ones. A person isn’t born with a gender—they develop it based on how they conform to masculine or feminine societal expectations. A male gender generally tells us that an individual identifies better with the male expectations of a culture. That could have to do with their preferences in sports, career, clothing, smoking, diet, hobbies, drinking, driving, exercise or a whole slew of other gender-based differences. These preferences or behaviors aren’t present at birth—they’re lifestyle choices that develop over time based on local, social influences.

When I attended the Society of Actuaries (SOA) Annual Meeting & Exhibit in October 2019, I was surprised to hear that these same lifestyle choices make up 80 percent of the mortality differences between males and females. It’s well-known that females have lower mortality in most countries, but Donald Samson, Ph.D., conducted a study on socioeconomic segmentation in cause-of-death data and found that biology only accounts for 20 percent of the mortality differences among men and women.1 The larger influences are related to smoking, exercise, alcohol use, diet and other lifestyle differences.

As the insurance industry shifts to align its practices with customer expectations (see Figure 1), a likely result is a transition from sex-based rating to gender-based rating, which includes nonbinary gender identities. An unexpected consequence of using gender-based rating may be more accurate risk evaluations for individuals whose gender identity doesn’t align with their biological sex. Risk evaluations for cisgender people, or those whose gender identity aligns with their assigned sex, will be no less accurate.

Figure 1: Percentage of U.S. Adults Who Think Forms Asking for Gender Should Include Options Other Than “Man” and “Woman”

Hover Over Image for Specific Data

Source: Graf, Nikki. About Four-in-Ten U.S. Adults Say Forms Should Offer More Than Two Gender Options. Pew Research Center, December 18, 2019.

Legal Recognition of Nonbinary Gender Identities Is Growing

There are many gender identities for people who don’t fit neatly into the male or female binary. Some examples include bigender, dual gender, agender or pan gender. Nonbinary gender identities have always existed, but they only started to become broadly recognized on legal documents in the United States in 2017. Oregon and Washington, D.C., were the first jurisdictions to offer nonbinary driver’s licenses (although Arkansas had for a while, but it wasn’t well known).

Other states followed suit, and many began to provide nonbinary birth certificates as well. As of this writing in early 2020, 22 states and the District of Colombia have nonbinary gender markers on birth certificates and/or driver’s licenses through either statute or policy.2 This covers more than 40 percent of the U.S. population and is projected to continue growing—Illinois already approved the change and Michigan is currently exploring the idea. Worldwide, at least 13 countries have legal recognition of nonbinary gender and/or sex, including Canada, Australia, India, Nepal, Argentina and others.3

Should We Request a Person’s Sex if They Are Nonbinary?

With changes in legal documents and customer expectations, gender identity appears to be the most likely path forward in customer identification. But we’re leaving a world where sex was often the desired attribute for rating and underwriting.

How are sex and gender different? A person’s sex is determined by chromosomes, hormones, and internal and external reproductive organs. In most cases, all four of those sex indicators are consistently male or consistently female. When that’s the case, doctors can assign a newborn’s sex accurately by observing their external reproductive organs. However, for those whose sex indicators are not aligned, as is the case for intersex individuals, assigning a binary sex is not accurate.

Infants born with ambiguous genitalia may know they are intersex their whole lives, but that’s the minority of intersex individuals. The majority are assigned a binary sex at birth and do not know they are intersex until later in life, if ever. Some learn they are intersex at puberty, when hormones kick in and result in transformations like breast development, body hair, facial hair and voice changes that are inconsistent with their external reproductive organs. Still others learn they are intersex when they struggle to conceive. Chromosome variations also are becoming better known through increasingly affordable DNA testing.

While a person’s sex marker assigned at birth is often accurate, somewhere between one and two infants per 100 are born intersex and assigned an inaccurate binary sex at birth. Actuaries are good at percentages, but it helps me to think about it like this: My son has 100 kids in each grade in his elementary school. There are likely one or two intersex child(ren) per grade. Some may already know that about themselves, but many do not. For intersex individuals, questions such as What was your birth sex? can be confusing, if not intrusive. The biologically correct answer is “intersex,” but their birth certificate was forced to list a binary sex, which is likely what the requestor is asking. What sex did the doctor assign you when they looked at your genitals at birth? isn’t a question most of us would feel comfortable asking, but that’s really what we’re inquiring about when we challenge a person to talk about their sex instead of their gender.

Are There Risks When People Can Self-Identify?

This seems to be one of the first questions that crosses people’s minds when we talk about incorporating nonbinary gender identities into rating. The risk of a person providing false information on their insurance application isn’t new. In a sex-based rating system, we typically allow the customer to select only a binary sex. Intersex individuals are forced into an inaccurate binary selection. Transgender customers do not receive much guidance regarding whether to submit sex or gender, so they most likely provide a mix of each. The remaining majority—cisgender customers—can enter an inaccurate sex on their application intentionally. Few carriers ask for verification, so the customer risks the repercussions of any fraudulent actions, which often come up at claim time.

With nonbinary genders recognized on legal documents, customers are beginning to ask for forms and applications to include nonbinary options as well—so they’re not forced into a false selection. Even so, a person still could make an inaccurate selection. A customer falsely selecting a nonbinary gender is slightly less risky for the insurance company than selecting a false binary gender, as nonbinary rates are likely to fall somewhere between male and female to ensure they’re not discriminatory.

In the end, providing false information on an insurance application is fraudulent activity regardless of the question. Many of the states that include nonbinary gender markers on birth certificates and/or driver’s licenses already require the individual to sign an affidavit stating that they are not changing their gender marker for a fraudulent purpose. The benefits of including options for nonbinary customers and the potential for more accurate risk evaluations hopefully will outweigh a possible increase in fraudulent activity.

How Large Is This Population?

Nonbinary gender identities make up somewhere between 10 percent and 12 percent of U.S. adults ages 18 to 34 (see Figure 2). According to GLAAD’s Accelerating Acceptance 2017 survey, only 88 percent of millennials identified as cisgender. The remaining 12 percent were nonbinary or transgender. Older generations are less likely to identify as nonbinary or transgender. Using the current distribution of adults in the United States, nearly 6 percent of adults currently identify as nonbinary.

Figure 2: Gender Identification in the United States by Age Group

Hover Over Image for Specific Data

Source: GLAAD. Accelerating Acceptance 2017. GLAAD, 2017 (accessed June 16, 2020).


Some people may go their whole lives without knowing their true biological sex, while others may know their biological sex and prefer not to discuss it. Conversely, everyone knows their gender, and most prefer to discuss it—gender is how people identify and is more indicative of their lifestyles. With lifestyle choices making up most of the health and mortality differences among us, gender may turn out to be both more inclusive and more important in measuring insurance risk going forward.

Erin Sheriff, FSA, MAAA, is an actuary at Principal Financial Group.

For additional reading, download the presentation from Session 143 at the 2019 SOA Annual Meeting & Exhibit: Non-binary Gender Identity and the Insurance Industry: Impact Analysis and Discussion.

Copyright © 2020 by the Society of Actuaries, Chicago, Illinois.