A New York consumer advocacy group wants regulators to look at how auto insurers are setting rates for customers, arguing that many rely too heavily on non-driving factors that discriminate against certain segments of the population.
The New York Public Interest Research Group studied data from four of the state’s top five insurance companies and found three of them – GEICO, Liberty Mutual and Progressive – quoted less-educated customers in lower-income jobs as much as 41 percent more than higher-educated customers in more professional jobs.
An industry spokesman said companies are operating properly and use accepted indicators that predict risk to set rates.
In Buffalo, GEICO, Liberty Mutual and Progressive quoted a retail cashier with a high school diploma an average of $213 more in premiums per year than a college-educated bank executive, when all other factors were kept the same.
Liberty Mutual quoted the same fictitious Buffalo consumer $432 more in premiums based solely on education and occupation.
The group wants the Department of Financial Services to review the rate- setting practices of New York State auto insurers to disallow such nondriving factors as education, occupation, homeownership and credit score on the grounds that they “unfairly discriminatory,” especially to black and Hispanic consumers, according to the report.
NYPIRG said using those socio- economic indicators when calculating insurance premiums is as discriminatory as using a consumer’s income as an underwriting factor – something insurers are legally prohibited from doing.
But auto insurers said there is nothing untoward about the practice.
“These factors are correlated with risk, which is why regulators have allowed the use of education and occupation in determining how much a consumer pays for insurance,” said Ellen Melchionni, president of the New York Insurance Association.
“Companies are only allowed to use factors that are predictive of loss,” she said.
Melchionni said that insurance pricing is more transparent than ever and that more than 60 insurance companies in the state compete on price and underwriting to give consumers a wide range of prices and options.
“Companies use a variety of underwriting factors to determine the price of a policy, all of which have been approved for use by regulators,” Melchionni said.
But NYPIRG insists the focus should be on driving record and experience.
“We’re not convinced that there’s a correlation between attained education level or employment-tier status and driver safety,” said Andy Morrison, a campaign director for NYPIRG.
He noted that State Farm, one of the state’s biggest auto insurers by market share, does not use education and occupation in its underwriting.
“The government requires all New York drivers to purchase car insurance, so they should also require that companies set prices fairly and affordably,” Morrison said.