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Sturm College of Law


Racial discrimination, Insurance rates


As the state of the insurance industry indicates, policy makers and academics have reached little consensus about how to address the implications of rational discrimination. This Current Topic argues that rational discrimination should not be viewed simply as a question of profitability or financial interests, but must also be approached from a moral perspective. Part One examines the underlying cause of rational discrimination in one particular insurance market,' locating its ultimate source in the historical injustices perpetrated against Blacks. This section condemns rational discrimination for perpetuating and even exacerbating social inequalities. The analysis suggests that our society will not fully succeed in reducing economic asymmetries between Blacks and Whites unless it confronts rational, as well as irrational, discrimination." Parts Two and Three examine two alternative methods of interfering with rational discrimination in insurance: prohibiting the practice altogether or compensating for its deleterious effects through a subsidy. While either approach will reduce the correlation between race and risk, this analysis suggests that a subsidy offers significant moral and practical advantages over a prohibition.

Publication Statement

Originally published as Martin J. Katz, Insurance and the Limits of Rational Discrimination, 8 YALE L. & POL'Y REV. 436 (1990).

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