As far as I know, there is no strong relationship between race and lifetime insurance expenditures. Hypothetically though, yes, insurance companies should be allowed to make optimal decisions based on full actuarial information. Anything else, besides being sub-optimal and confounding the effectiveness of market mechanisms, would amount to the effective intentional transfer of wealth based on race, which is morally much worse than rational actuarial pricing that incidentally involves race as a predictor.
That doesn't mean it makes sense to charge different premiums.
Insurance only works if the group is large and shares the risk. If you break it down on race, gender, age, and the thousands of other physical characteristics that correlate to something medically, you wind up with groups too small for insurance to work.
We don't charge black people lower Social Security and Medicare taxes on account of their lower life expectancy, right?
> you wind up with groups too small for insurance to work.
This is quite simply not true, and I can't help but think that this statement comes from a very fractured rule-of-thumb understanding about how insurance works.
Insurance works by charging you around (naively slightly more than, but actually usually slightly less than) your expected cost to the insurance pool. It doesn't matter if different pool members have different costs; as long as you charge them appropriately, insurance continues to work fine. Why do you think that charging different amounts to different customers would require splitting the pool?
You set the premiums based on the expected risk of an event happening, for any type of actual insurance at all. "Actual insurance" is supposed to be a financial product that people purchase to mitigate financial risks of some future event that may or may not happen. If the bad thing happens, you make a claim and the insurance company pays you a lot of money. This system works most things because most people don't make claims.
What we call "health insurance" in America has gotten away from this model and that's one of the reasons why it is expensive and was horribly broken before 2009. Trying to cram everyone into one giant pool and charge them all the same amount of money in the hopes that the pool will be big enough is not working either, and doesn't solve the underlying problem with that system, which is that people make claims all the time and the insurance company often must pay. Thus, it becomes the customer and the entire transaction is less about serving the patient and more about milking the insurance company for every penny.
> We don't charge black people lower Social Security and Medicare taxes on account of their lower life expectancy, right?
Taxes aren't insurance premiums and those programs don't function as actual insurance; they're "social insurance" e.g. The federal government definitely makes payments to everyone who qualifies, no matter what happens to them. And taxes used to fund the program get spent on everything the government does, not just to fund those programs. So, this really isn't relevant to the question of what an insurance company should be doing.
