Nevada Amendments Could Hurt Drivers

December 17, 2001

According to the National Association of Independent Insurers (NAII), several amendments the Nevada Division of Insurance is considering to underwriting and rating regulations would hurt consumers who find it difficult to afford automobile coverage and would force some good drivers to unfairly subsidize premiums for higher risk motorists.

The proposals would also result in huge administrative expenses for insurers, who would be forced to pass on that cost to policyholders, Dana Bennett, local counsel for NAII, testified before Department of Insurance officials.

“The bottom line is that the proposals would restrict insurer underwriting and rating practices and impose additional notice requirements on insurers,” Bennett said.

The three proposals under consideration that NAII opposes include revised rating tiers, coverage for permissible drivers and chargeable accidents.

Rating Tiers: This proposal would require an insurer to issue notices to every applicant for insurance who is not placed in the insurer’s most preferred rating tier.

“There is no expectation by the public, nor by the legislature, that ‘everyone’ qualifies for the most preferred rating tier,” Bennett testified. “Certainly, a young, inexperienced driver does not expect that he or she will qualify for the same rate charged to a middle-aged driver with a good driving record and long driving experience.”

Coverage for Permissive Drivers: If approved, this proposal would prohibit an automobile insurer from providing lower liability coverage to permissive drivers, those who borrow a vehicle with an insurer’s permission.

“An insurance policy provision which limits liability coverage for permissive drivers to at least the financial responsibility limits gives a consumer an opportunity to lower his or her automobile insurance premium,” Bennett commented. “Such a policy provision does no public harm. Those who may be injured in an accident with a permissive driver would still have the assurance that the permissive driver has liability coverage at the state’s financial responsibility requirements.”

Chargeable Accidents: This final proposed amendment would prevent automobile insurers from considering not-at-fault accidents, which are a proven indicator of risk of loss.

“Consideration of previous accidents when an insurer underwrites and rates a new insured is a legitimate, fair practice,” Bennett said. “A person who has had several prior accidents, even when the person was not at fault, is statistically more likely to have future insured losses.

“The amendments’ prohibition against the use of non-chargeable accidents in all underwriting and rating decisions would force insurers to ignore proven loss correlations. This would mean that some drivers would have to pay more to subsidize the rates of drivers who are unfairly given lower rates because of the proposed amendments.”

The DOI closed the hearing without deciding whether to adopt the proposed amendments.

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