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In My Opinion

Fair Profiling

by Walter C. Wright

For the past several years, there has been significant public discussion of racial and ethnic profiling, generated in large part by the practices of the New Jersey State Police. This discussion increased in the wake of September 11, 2001, related primarily to the use of ethnic profiling as a tool of airport security.

In my opinion, federal officials responsible for airport security should focus on security, and not be overly concerned about the political correctness of "profiling." They should take a lesson from the actuarial profession, and develop standards of practice based on a logical consideration of issues and needs.

When specific acts of discrimination are widely viewed as repugnant, public opinion regarding these acts can change into "politically correct" generalizations. For example, finding that some acts of discrimination are reprehensible leads many people to the "discrimination" is usually used pejoratively, without the need for the modifier "unfair." But discrimination and profiling are not inherently wrong: it just depends on how they are used in practice. Certainly no one who believes in affirmative action, for example, could argue that racial profiling is wrong, per se. Rather than jumping to generalizations, we can judge the good and bad of actual practices and we should hope that government regulators could do the same.

As actuaries, we are used to developing and working with risk classification systems, which are a form of profiling. Although profiling and risk classification are far from identical, there are similarities. Under any risk classification system, individuals are classified according to the expected value of their future costs, frequently using group characteristics (age, gender, health history, and so forth) as proven proxies for these expected future costs. They are required to pay a higher or lower premium than they would pay if they were not members of the particular group or groups to which they belong.

Under systems of ethnic profiling for security purposes, some individuals are screened based on group characteristics (race, apparent ethnicity, country that issued passport) and those who meet certain criteria are then required to submit to some inconvenience, such as being required to have their baggage searched. One objective of airport security profiling is to identify individuals with a higher than average probability of being a security risk, so that they can be prevented from boarding with weapons. This first objective is similar to risk classification for insurance purposes. A second objective is to discourage armed terrorists from even attempting to board planes. If this second objective is fully achieved, then not only will there be no terrorist attacks in planes, but no terrorists will be discovered by airport security checks. Actuaries might think of this second objective as the prevention of adverse selection.

There is a concern for "fairness" of both risk classification systems and profiling. Risk classification systems are judged in accordance with whether they are "fair," and the "fairness," or the lack thereof, of profiling systems has been a major public concern. But "fairness" should be evaluated in the context of the objective of the risk classification or profiling system, and different objectives lead to different definitions of fairness.

One of the primary purposes of risk classification, as stated in Actuarial Standard of Practice No. 15, is to be "fair." In the context of the rest of the Standard of Practice, it is clear that "fair" means that insurance premiums should be proportional to expected costs among the risk classes, to encourage widespread coverage and protect the financial health of the financial security system. This definition is widely accepted within the context of insurance, but it can be trumped by public policy issues. In the United States, for example, life insurers are no longer permitted to use race as a risk classification variable, and gender is no longer used for determining pensions. Presumably, these classifications were judged within the context of insurance classification systems, and it was found that their predictive value was not great enough to warrant their use when balanced against other social values.

One purpose of racial profiling, apparently as used by the New Jersey State Police, was to catch drug runners. There was no credible evidence that the use of profiling was effective or justified, and this practice, rightfully denounced as unfair, was discontinued.

The primary purpose of ethnic profiling, as used in airport security procedures, is to prevent terrorist acts on airplanes, thereby maintaining the safety of air passengers and the viability of our air transportation system. In the context of air safety, the inconvenience and possible embarrassment of being searched is minor, and not a cause to claim that civil liberties are being violated.

The Federal Aviation Administration (FAA), however, seems to have opted for a politically correct approach. FAA officials have stated that no one will be singled out for an inspection because of their apparent ethnicity, religion, or national origin. The FAA Web Site states that:

"Protecting the constitutional and civil rights of the American public remains one of our highest priorities. None of the new security measures decrease the responsibility of airports and airlines to enforce (various laws) regarding discrimination. Federal civil rights laws prohibit discrimination on the basis of a person's race[,] color, national origin, religion, and sex."

The FAA should follow the lead of the actuarial profession, and have a standard of practice for profiling. Given profiling's primary purpose, security, the FAA guidelines should be simple:

The events subsequent to September 11 give rise to legitimate concerns about civil liberties. But let's not allow illogical political correctness to interfere with security needs. And let's not trivialize concerns about civil liberties by whining about the role of ethnic profiling in airport security checks.