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New Jersey resident Ana “Cookie” Rivera, a high school graduate working as a labor and civil rights activist and DJ, was paying nearly $3,000 a year for auto insurance with a major corporation. Now she’s paying nearly $2,000 less to have her 2016 Jeep covered.
the difference? The new, smaller insurance company doesn’t take into account their education or occupation when setting their rate.
a invoice In New Jersey the state legislature would prohibit all auto insurers from considering “non-driving” factors such as education, occupation or credit score when setting rates. A few states already have such a ban, and many are considering it.
Currently, most insurers use these criteria, along with driving records, distance traveled, and other factors including age and gender to determine rates. Consumer advocates say the use of non-driving factors penalizes low-income people and people of color, who have disproportionately low levels of education, low-paying jobs and low credit ratings.
Insurers say that if they don’t take these criteria into account, everyone’s prices will go up, including those with already high premiums.
New Jersey has the lowest rate of uninsured drivers, at 3.1%, according to the Insurance Information Institute, an industry organization. The figure shows that state residents can purchase affordable auto insurance under the current system, said New Jersey Assembly Majority Leader Lou Greenwald, a Democrat, he told the New Jersey Monitor in December, so the law may not need to be changed. The state Senate passed the bill in the last session, but it died in the House of Representatives. It was presented by the sponsors again at this session.
Auto insurers Geico, Progressive and Liberty Mutual — the company Rivera initially used — had higher rates on average for people with less education, according to a 2021 report. Survey by Consumer Reports. The report found that Geico and Progressive also quoted higher rates for service workers than for managers and executives.
Stateline has reached out to the three companies for comment and has not received any responses.
“How does your education, occupation, and income relate to how you drive?” She has a clean driving record and good credit, said Rivera, a mother of six and grandmother of 29. Working two jobs and moonlighting as a disc jockey, “DJ Lady C.”
But the Commercial Property Casualty Insurance Association of America maintains that all of these factors are “valid predictors” of the risks companies face in insuring customers.
“It is our view that as long as a factor adds to the risk assessment, and does not violate anti-discrimination laws, it is an agent that companies can use,” said David Snyder, vice president and assistant general counsel for the association. in an interview.
If states eliminate some of the criteria, he said, clients deemed less likely to claim damages would support those who pose a greater risk of making claims to the company.
“You can offset that by weighing other factors or looking at risk in another way. It’s a shift in costs. Better risks pay more than they should, and worse risks don’t pay what they should,” Snyder said.
But a study of Michigan’s major auto insurance reform law, which was implemented in 2020, showed lower premiums for most drivers, at least at first. The changes eliminated education, employment, and credit score as risk factors, among other changes to personal injury coverage and the implementation of “no-fault” liability insurance.
Thezebra.com, which serves as a comparison shopping site for insurance buyers, found in its 2023 state-by-state auto insurance rankings that Michigan residents saw average annual rates drop from $3,106 in 2019 to $2,535 in 2020, a decrease of 18%. The report showed that prices rose 4% in 2021 to $2,639.
Part of the rise, advocates say, may have been insurers finding other ways to incorporate income and education information without asking these questions directly.
Businesses can use geographic regions to estimate premiums or create “affinity groups” that offer them discounts. For example, members of a trade group, such as those of doctors or lawyers, or Ivy League graduates, may get better rates than others. Supporters say the discounts could be a way to entice wealthy buyers to “pool” their other insurances, such as home or boat insurance, with the same company.
Eric Bowe, owner of CURE auto insurance, based in New Jersey, is against his industry on the issue. Bo has testified in several states that non-driving factors should not be taken into account. He has been writing policies in Michigan ever since the insurance reform law went into effect. He has also testified before Congress, supporting a 2020 federal bill introduced by Democratic New Jersey Senator Cory Booker that would ban policies involving factors not related to leadership. This law has not moved.
“I’m disappointed that the rest of the industry and the rest of the state legislatures haven’t been able to pass these bills against what harms low-income drivers in the state,” Bo said in an interview. “I am the one who exposed my own industry using non-leadership factors.”
Poe, whose company wrote Rivera’s cheaper policy, said other companies want to take into account occupational, income and credit criteria because they help weed out more expensive customers, such as those who are more likely to file claims for small amounts of damage to their cars in the event of a crash. incident. Wealthy clients often pay small amounts of their own money for damages to avoid increased insurance rates.
“If you can eliminate the bottom 10% of earners, you remove a lot of the volatility and unpredictability in our business,” he said.
Wealthy professionals get good deals, said Carmen Palber, executive director of the nonprofit Consumer Watchdog Group, which investigated the case. “Grocery cashiers, bus drivers – they are never on the list. These are blatant agents of racism and income discrimination that have no place in the insurance industry.
California, Hawaii and Massachusetts have permanently banned the use of credit scores in setting auto insurance premiums, according to the Consumer Federation of America. Nevada has issued a temporary ban on the use of credit information to increase insurance premiums during the COVID-19 pandemic. The Nevada Supreme Court upheld the ban and it will run through May 2024.
Washington state has issued a permanent ban on the use of credit information in determining insurance rates, but the court hit her last year.
California, Georgia, Hawaii, Massachusetts and New York ban the use of education and occupation in setting auto insurance rates, while Montana and North Carolina only ban education, according to thezebra.com.
But in California, many companies offer discounts for “affinity groups.” California Insurance Commissioner Ricardo Lara in 2019 investigated the use of these groups and found that less affluent and less formally educated consumers are less likely to benefit.
Lara called on insurance companies to extend their group deductions to low-wage workers, and to stop classifying clients by zip codes.
“Your zip code, education, or job shouldn’t determine whether you can get a car group discount,” he said.
Snyder, of the Insurance Association, said insurers calculate deductibles simply by assessing risk.
“All of this is subject to actuarial standards within companies and rate-regulating agencies in each government ministry,” he said. “Activists see this as a political issue. We are not interested in ‘political pricing’. We are interested in the risk of loss being transferred to the insurance company.
And in Colorado, Democratic Gov. Jared Polis signed a bill in 2021 that broadly rejects discrimination in auto and other insurance based on race, color, national origin, and other descriptive factors. The law also called for the insurance department to investigate whether other forms of discrimination, such as non-driving standards, are being used to disadvantage certain groups of people.
The administration has initiated a series of hearings on the issue, as required by law, with the goal of renewing the use of non-driving standards.
state limit It is part of the States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Stateline maintains editorial independence. Contact Editor Scott S. Greenberger with questions: firstname.lastname@example.org. Follow Stateline on Facebook And Twitter.
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