Public Hearing On Use Of Occupation And Education As Factors In Determining Rates And Underwriting
TALLAHASSEE (02/09/2006) - The Florida Office of Insurance Regulation (Office) today held a public hearing on the use of occupation and education as factors to determine rates and underwriting decisions for Florida auto insurance. Florida Insurance Commissioner Kevin McCarty ordered the hearing due to these factors' correlation to ethnicity and income status, and was concerned the use of such information may discriminate against minority and low-income policyholders who may pay higher rates irrespective of their driving record.
McCarty opened the hearing by asserting, "Florida has an incredibly rich and diverse racial and ethnic mix. Many of our minority or low income residents are beginning to work their way up the economic ladder. We do not want to make that climb tougher by penalizing these citizens due to their place on that ladder."
The Office issued subpoenas to several company groups including those representing GEICO, Liberty Mutual, and the AIG companies to evaluate their use of occupation and education to make rating and underwriting decisions. The consistent response from all three company groups was they do not collect information about race or income status from their policyholders and do not know if their practices disparately impact minorities or low-income individuals.
Asked by the Office's General Counsel Steve Parton if GEICO had looked at the impact of using education and occupation and its impact on minorities, Hank Nayden answered, "Nobody looks at it." When asked the same question, Chris Cunniff of Liberty Mutual stated, "I have not, and I am not aware of anyone in the company who has." An AIG representative stated he was, "not aware of any studies, other than our own book of business." When asked whether AIG collects information that would allow the company to make a determination AIG stated they did not. Another common theme in the hearing was that several companies asserting parts of their underwriting were trade secret.
Eric Poe, Chief Operating Officer of the New Jersey based Cure Auto Insurance Company, said he worries if the use of education and occupation underwriting factors is not stopped all insurers will have to adopt the practice. He said such practices lead to upper income policyholders being given discounts at the expense of lower income policyholders. Robert Hartwig, of the Insurance Information Institute, said it will be up to regulators and public policymakers to decide if the use of factors such as education and occupation in underwriting "are fair under the mores of society."
The Office plans to publish a report of the findings and testimony heard at today's hearing for review by the Financial Services Commission and the Legislature. A taped broadcast of the hearing, produced by The Florida Channel, will be available at http://www.floir.com/
early next week.
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