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I was one of just two consumer advocates outnumbered about 100 to 1 by insurance industry lobbists at the annual meeting of the National Conference of Insurance Legislators this weekend where I was invited to speak on a panel about the financial crisis but also had a chance to weigh in on the growing use of education and occupation information by insurance companies to set auto insurance rates.

Research by the Consumer Federation of America and Florida's Office of Insurance Regulation found that the use of education and occupation as rating factors leads to discrimination based on race and income.

CFA’s study highlights internal documents from auto insurer GEICO showing how “favorable” occupations generally “require a bachelor’s degree” and include physicians, architects and pilots, while unfavorable occupations include minimally-skilled clerks, long-haul drivers and “lower ranking” military. Unfavorable occupations are assigned to GEICO’s more expensive, sub-standard (instead of preferred) insurance companies.

NOCIL members chose to investigate this issue in more depth at their next meeting. I testified that it should be the priority of state lawmakers to protect insurance policyholders from price discrimination and redlining . Education and occupation redline policyholders by race and income, whether that is the insurer's intent or not.

Some of the lawmakers at this weekend's meeting seemed to understand this (as quoted on BESTWIRE):

"It seems to me, going down this road, we're going to have the best
rates for insurance executives with master's degrees, perfect credit
scores and who drive one mile to work. It's really narrowing things
down," said state Sen. David E. Bates, R-R.I., who proposed the topic
as a special agenda item.

Consumers can only hope other state lawmakers follow that lead and ban the use of education and occupation as rating factors because they are proxies for race and income. If NCOIL instead drafts "guidelines for use" (as it did with consumer credit scores) it will simply sanction rating factors that lead to discriminatory rates.

Not long ago, insurance actuaries "proved" that people of color are a bigger insurance risk and should be charged more accordingly. Nevertheless, we outlawed insurance discrimination by race. Lawmakers must make the same public policy decision and ban the use of schooling, employment and other factors that are tied strongly to race and income.