Industry Updates
Information Controversy

• Timothy Darragh
• April 2019
• 

Insurance trade groups are pushing back against a petition by consumer groups in California seeking to bar the use of educational level and occupation in setting personal automobile insurance rates.

Eleven groups, led by Consumer Watchdog, sent a petition to Insurance Commissioner Ricardo Lara urging the department to add a regulation prohibiting the factoring of educational level or occupation in determining auto rates and whether a consumer qualifies for coverage. Including them in underwriting auto policies essentially results in subsidies to the wealthy and well-educated, paid disproportionately by the poor, less-educated and minority groups, they said. Education and occupation in underwriting, the petition says, “are thinly veiled surrogates for wealth, ethnicity and race.”

But the organizations misunderstand how insurance underwriting and rating work, said Mark Sektnan, vice president of the American Property Casualty Insurance Association. “Consumers benefit when insurers use information that enables them to more accurately price auto insurance,” he said. “All consumers win when drivers who pose lower risk, pay less.”

With data collected over decades, auto insurers have found the education and occupation of a driver can be accurate variables for predicting the likelihood and severity of insurance claims, he said. State agencies enforcing insurance laws in Maryland and New Jersey “conducted extensive studies and found these factors to be without question, reasonable to use because they are predictive of losses,” he said.

Rates have to be approved by the California Department of Insurance, according to Proposition 103. “Therefore, all rates currently charged have been thoroughly vetted and found to be appropriate,” Sektnan said.