Samia Islam, a professor in the Department of Economics, was recently featured in a WalletHub article titled “Cheapest Car Insurance in Idaho.” Islam discusses the fairness of car insurance companies considering factors such as gender, age and occupation when setting premiums.
She argues that based on behavioral economics research, these factors are fair proxies for assessing risks, as younger individuals and males tend to have higher risk preferences. Additionally, occupation can indicate potential risk-taking behavior, which insurers use to avoid adverse selection – a situation where one party has more information than the other, allowing them to make decisions that only benefit them. Islam also addresses the fairness of insurance pricing for college students, explaining that they often face higher rates due to perceived emotional maturity and risk tolerance.