INDIANAPOLIS (February 15, 2007) – The National Association of Mutual Insurance Companies (NAMIC) disputed claims made by the Florida Office of Insurance Regulation (OIR) that auto insurance companies use education and occupation underwriting criteria to charge higher premiums to their minority and low-income customers.
“Insurance companies do not collect information about race or income, nor are they engaged in an effort to make coverage unavailable or unaffordable on the basis of race or income,” said Liz Reynolds, NAMIC’s state affairs manager for the Southeast U.S., in a hearing before the OIR on Friday. “They are, however, in the business of competing with other insurers to most effectively match rate to risk and garner market share in the process.”
NAMIC research conducted and released in a public policy paper in 2004 points out that “the foundation of the business of insurance underwriting and rate-making is classifying policyholders by risk. Since insurers make decisions based on actuarial and business principles that group policyholders for the reason of treating similar policyholders similarly, any potential correlation to race is not part of the risk assessment process. This renders the disparate impact test an unreliable means by which to identify illegal discrimination. As the Seventh Circuit states in NAACP v. American Family Mutual Insurance Co., 978 F2d 287 (7th Cir 1992), ‘[r]isk discrimination is not race discrimination.’”
“Insurers need to be able to engage in this function (underwriting) as freely as possible in order for insurance markets to work properly, which ultimately benefits consumers and society in general,” Reynolds stated.
As recently as June of 2006, Maryland Insurance Commissioner Steven Orr found no evidence that a particular company’s use of education or occupation as underwriting factors “is intended to have, or actually has, a disparate impact on any protected class.” He went on to state that “use of education and occupation in underwriting is lawful. Education and occupation, as underwriting factors, meet the actuarial standards of practice related to classification. In addition, both education and occupation have been shown to be valid predictors of loss.”
“NAMIC supports underwriting freedom and opposes limitations and restrictions on insurers’ ability to underwrite freely. Underwriting, involving the assessment, analysis and pricing of risk, is the most fundamental function of insurance,” Reynolds explained.
For further information, contact
(202) 628-1558 Tel
(202) 628-1601 Fax
(904) 379-4896 Tel
(904) 379-4896 Fax
Posted: Thursday, February 15, 2007 12:00:00 AM. Modified: Thursday, February 15, 2007 4:07:20 PM.
317.875.5250 - Indianapolis | 202.628.1558 - Washington, D.C.