Lawmakers Could Change How Auto Insurance Rates Are Calculated

It can be rather startling to see the different rates that result from insurance inquiries that differ in only one detail.

When some lawmakers looked at Geico’s website, they found that a waitress would pay 70 percent more for car insurance than an attorney.

Representative Bill Hatch of Gorham, a Democrat, says that rate difference was based only on the applicant’s different occupations.

And he says he thinks that way of setting rates is unfair.

…what most people assume, or understand is that their insurance rate is dictated by whatever driving record they may have and whatever risk they present on the highway, as a group . and the more risk you present, the higher your premium would be. And that’s what’s assumed to be appropriate and fair, but that’s not what we’re currently allowing the companies to do.

Hatch is the prime sponsor of the bill that would prohibit insurance companies from using occupations or educations to determine rates.

Insurance industry officials say they have actuarial data that shows there is a relationship between the two factors and how often these groups have accidents.

Alex Hageley of the Property Casualty Insurers Association of America, or P-C-I, says for that reason, outlawing the practice would be bad policy.

We strongly oppose any efforts to limit the usage of actuarial justified information because in the end all that does is harm consumers when insurance companies are limited in their ability to do what they do, which is issue insurance and price insurance.

The Consumer Federation of America in Washington has singled out GEICO for its.

They’ve charged that the company discriminates against low income customers by employing the practice.

Robert Hunter of CFA says in many areas that economic discrimination also adds up to racism, and that should be enough to get states to act.

Well there is a prohibition against using race. And there’s a pretty general acceptance of the fact, within the industry and outside that income should be not be used. So if a system of classifying is a surrogate for that, then I think it should be banned.

Back in New Hampshire, the state’s Insurance Commissioner says not every company in the state uses education or occupation to work up rates.

In fact, Roger Sevigny says some companies use other factors instead, such as looking at an applicant’s credit score.

Commissioner Sevigny says some critics find fault with not restricting all these practices, but there is little he can do to address them.

It’s not up to me to decide what….what’s good public policy. It is up to me to enforce whatever law are put on the books. And if the legislature were to say that’s no longer permitted then we would be the first to go out there and say that it’s not permitted anymore.

A few states around the nation have already banned the practice.

Pennsylvania and Wisconsin have laws on the books.

Florida is considering passing one.

But here in New Hampshire, insurance companies and state officials agree that consumers can choose which companies they want to deal with, since not every insurer sets rates using education or occupation.