Enacting Actuarial Fairness in Insurance: From Fair Discrimination to Behaviour-based Fairness

Abstract

ABSTRACTIn line with developments in the personalisation of risk, the idea that insurance products should above all be ‘fair’ to the policyholders is increasingly voiced by commentators. The performativity thesis in Science and Technology Studies usually used to study economic markets can be used to investigate different enactments of ‘actuarial fairness’ in insurance practice. Actuarial fairness functions as a technical economic concept and was coined by the neoclassical micro-economist Kenneth Arrow (1921–2017). Faced with anti-discrimination legislation, the insurance industry has, since the 1980s, advanced the principle of actuarial fairness to legitimise their medico-actuarial technologies to discriminate between risk groups. In the absence of this actuarial fairness, it is assumed that dynamics of adverse selection—derived from neoclassical assumptions about economic actors— will result in the bankruptcy of insurance providers. The paradigmatic case of Fairzekering, a showcase of contemporary behaviour-based personalisation in car insurance, demonstrates an important shift in how actuarial fairness is enacted through behaviour-based calculative devices. Here, policyholders are enacted as being personally in control of their driving style while an interactive discount-infrastructure is set up to provide real-time feedback to incentivize policyholders towards ‘good behaviour.’ This enactment of behaviour-based fairness simultaneously implies a shift in the enactment of the economic actors involved, constitutive of the making of new economic ideas in behavioural economics.