insurance companies were trying to cover people who already have a chronic disease like AIDS, or who were

elderly, they would charge these groups very high premiums for health insurance, because their expected

health care costs are quite high. Women in the age bracket 18–44 consume, on average, about 65% more in

health care spending than men. Young male drivers have more car accidents than young female drivers. Thus,

actuarially fair insurance would tend to charge young men much more for car insurance than young women.

Because people in high-risk groups would find themselves charged so heavily for insurance, they might choose

not to buy insurance at all.
400 16 • Information, Risk, and Insurance

State insurance regulators have sometimes reacted by passing rules that attempt to set low premiums for

insurance. Over time, however, the fundamental law of insurance must hold: the average amount individuals
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