Insurers Dispute Fla. Criticisms of Education and Job Rating Criteria

The National Association of Mutual Insurance Companies disputed claims made by the Florida Office of Insurance Regulation that auto insurance companies use education and occupation underwriting criteria to charge higher premiums to their minority and low-income customers.

“Insurance companies do not collect information about race or income, nor are they engaged in an effort to make coverage unavailable or unaffordable on the basis of race or income,” said Liz Reynolds, NAMIC’s State Affairs Manager for the Southeast, in a hearing before the OIR last Friday. “They are, however, in the business of competing with other insurers to most effectively match rate to risk and garner market share in the process.”

The group cited its own public policy paper in 2004:

“Since insurers make decisions based on actuarial and business principles that group policyholders for the reason of treating similar policyholders similarly, any potential correlation to race is not part of the risk assessment process. This renders the disparate impact test an unreliable means by which to identify illegal discrimination. As the Seventh Circuit states in NAACP v. American Family Mutual Insurance Co., 978 F2d 287 (7th Cir 1992), ‘risk discrimination is not race discrimination.'”

Reynolds said that insurers “need to be able to engage in this function (underwriting) as freely as possible in order for insurance markets to work properly, which ultimately benefits consumers and society in general.”

The group also pointed to experience in Maryland where Insurance Commissioner Steven Orr upheld the use of education and occupation in underwriting. “Education and occupation, as underwriting factors, meet the actuarial standards of practice related to classification. In addition, both education and occupation have been shown to be valid predictors of loss,” Orr found.

Source: www.namic.org

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