N.Y. bans use of education, job in setting auto insurance rates

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New York State has banned auto insurers from using educational attainment level or occupation and earnings as a base when determining rates, saying the practice could be discriminatory.

The New York Department of Financial Services (DFS), which regulates insurance in the state, has made an agreement with Allstate and Liberty Mutual to eliminate such factors when determining rates in the Empire State.

“New York drivers who do not have a college degree or a high-paying job should not be penalized in the form of higher auto insurance rates,” Financial Services Superintendent Maria Vullo said in statement announcing the change.

“This regulation requires insurers to openly justify the use of education and occupation data in setting rates, ensuring that New Yorkers are not unfairly discriminated against and being charged higher rates due to factors outside their control or unrelated to driving ability,” Vullo added.

newsAccording to DFS, the use of education and occupation in determining insurance rates can penalize drivers without college degrees or who work in low-wage jobs or industries.  The result is that drivers with higher education and income pay less for auto insurance with no evidence that they are better drivers.

DFS conducted a multi-year investigation, which revealed that some, but not all, insurers in New York use 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 have been placed in less favorably rated tiers, which may lead to higher premiums, without sufficient actuarial support that an individual’s education level and/or occupational status related to his or her driving ability or habits in such a way that the insurer would have a different risk of loss, DFS said.

Under the final regulation, auto insurers are now 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 a rate that violates Insurance Law provisions ensuring the public welfare by regulating insurance rates so they are not excessive, inadequate, or unfairly discriminatory.

The final regulation provides 180 days for insurers that had been using education level and occupational status in initial tier placement and tier movement and have not already reached agreements with DFS in compliance with the regulation to amend their multi-tier rating programs and tier movement.

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