The Florida Office of Insurance Regulation will propose legislation soon to restrict the use of education and occupation as rating factors for personal lines insurance customers, officials said.
Last week the OIR put out a report finding that use of education and occupation to rate customers unintentionally harms minorities and low-income individuals.
As a result, the OIR said it will propos a measure that will permit the use of such factors in underwriting and rating only if the carriers can prove it does not disproportionately impact consumers based on race and income.
Commissioner Kevin McCarty said that the practice is legal under Florida law. "However, similar to insurance companies' past use of credit scoring, this practice creates unintended effects that policymakers may find unacceptable," he said.
Chief financial officer Alex Sink and Consumer Advocate Bob Milligan issued separate statements urging a legislative remedy to any purported consumer harm from the use of these factors in underwriting and rating.
In 2003, the Florida Legislature passed Section 626.9741 severely limiting the use of credit scoring in insurance underwriting after this practice was also shown to disproportionately impact minorities and low-income individuals.
As early as 2004, the OIR informed the industry that utilizing the factors of occupation and education for underwriting and rating was questionable, and the OIR advised the industry to cease within one year.
More recently, GEICO's high-profile use of education and occupation in auto insurance premium determination has garnered national attention, the OIR noted.
The OIR issued subpoenas to several company groups including those representing GEICO, Liberty Mutual and AIG to evaluate their use of occupation and education for rating and underwriting decisions.
The OIR held the public hearing in Tallahassee last February and the report finding unintentional impact on minorities and low income residents was based on that hearing.
All three insurance company groups utilizing these practices claimed they were doing so on a "color-blind" basis as they do not collect race or income information.
"Yet these companies openly admitted they have not researched the potential impact of their practices on vulnerable classes of consumers," Mr. McCarty said.
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