GEICO to Comply with New York Reg Banning Discriminatory Auto Insurance Rates

A third major automobile insurance company in the New York market has reached agreement with the New York Department of Financial Services (DFS) in compliance with the department’s final regulation prohibiting insurers from using an individual’s occupational status and/or educational level as unfairly discriminatory factors in setting rates.

DFS announced that GEICO has articulated to the Financial Services Superintendent Maria T. Vullo’s satisfaction how it will comply with the regulation, which will eliminate any continuing impact of the company’s prior use of education level attained and/or occupational status and removing such use in underwriting new business.

Financial Services Superintendent Maria T. Vullo

“We are pleased that GEICO has recognized its responsibilities to immediately comply with this regulation, and we expect any other company that may be utilizing education and occupation in their underwriting to immediately agree to comply before the effective date of the regulation,” Vullo said in a DFS press release.

The company joins Liberty Mutual and Allstate, who previously reached agreement with Vullo. Together, the three companies provide coverage to nearly half of the private passenger auto insurance market in New York.

DFS conducted a multi-year investigation that revealed that some, but not all, insurers in New York have used an individual’s education level and/or educational status in establishing initial tier placement without a clear demonstration of the required relationship between these factors and driving ability.

As a result, classes of insureds were impacted unfairly because their rates were being skewed from a policy’s inception, regardless of whether the insurer could rationally predict a different risk of loss for that insured.

Under the DFS regulation, which was finalized in December 2017 and made effective this month, private passenger auto insurers are prohibited from using drivers’ occupational status or education level as a factor in initial tier placement unless the insurer demonstrates, to the satisfaction of the Superintendent of Financial Services, that its use of occupational status or educational level attained in initial tier placement or tier movement does not result in rates that are excessive, inadequate or unfairly discriminatory.

Source: New York Department of Financial Services