What personal data should insurers be allowed to use to price premiums?
This question has been raised in New York, as a regulator is said to be considering prohibiting auto-insurers from using consumers’ occupations to price their policies.
The New York Department of Financial Services has asked a group of insurers – including Allstate, Geico, Liberty Mutual and Progressive – to explain why the practice should not be prohibited, the Wall Street Journal
The proposal has reignited a debate that has rumbled on for years, as regulators, insurers and consumer advocates disagree over what data should and should not be considered in the pricing of insurance policies.
“As long as state governments require drivers to buy insurance, they should require insurance companies to price their product based on how we drive, not who we are,” J. Robert Hunter, the Consumer Federation of America’s insurance director, told the WSJ.
But an official with the trade group Property Casualty Insurers Association of America, Alex Hageli, said that insurers’ ability to assess a range of factors results in increased availability of insurance for drivers, as insurers naturally want to use “accurate predictors of loss.”
An Allstate representative told the WSJ:
“Drivers less likely to incur losses should pay less for insurance than drivers more likely to incur losses.”
A spokesman for Liberty Mutual said the company was working “productively” with the Department of Financial Services, “just as we would on any issue related to auto insurance regulation in New York.”
Some states already have limits on the use of data in pricing insurance, including Massachusetts in which insurers are banned from using information on occupation or education in setting rates.
Geico faced a federal lawsuit in 2006, which alleged that the company’s use of education and employment status as a factor in determining prices constituted discrimination.
A judge denied the suit class-action status, finding that the insurer “continually re-evaluates its occupational categories and moves occupations from one group to another,” and the case was eventually dropped.
What is your opinion on occupational data being used to price insurance premiums? Leave a comment below with your thoughts.
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