On May 16, Gov. Andrew M. Cuomo announced a proposed regulationto protect New Yorkers from what he sees as excessive and unfairlydiscriminatory auto insurance rates.

The Department of Financial Services (DFS) regulation, issuedafter an extensive investigation, would prohibit insurers fromusing an individual's occupational status or educational level asfactors in setting rates, unless the insurer demonstrates to thesatisfaction of the Superintendent of Financial Services that theuse of these factors does not result in rates that are "unfairlydiscriminatory."

New consumer protection

"This new protection cracks down on this unfair practice thatsoaks drivers for not having a college degree or a high-payingjob," Gov. Cuomo said. "These metrics are discriminatory, have norelationship to how good a driver you are and should not be used asan excuse to overcharge New Yorkers."

As explained in Cuomo's announcement, the use of education andoccupation in determining insurance rates can penalize driverswithout college degrees or who work in low-wage jobs or industries.The result is that drivers with higher education and income oftenpay less for auto insurance with no evidence that they are betterdrivers. The multi-year investigation by DFS revealed thateducation and occupation were used without a clear demonstration ofthe required relationship between these factors and drivingability.

"Under this proposed regulation, auto insurers cannot useeducational and occupational status in their insuranceunderwriting, unless they can clearly demonstrate a plausiblerelationship to the risk of loss." Financial ServicesSuperintendent Maria T. Vullo said. "Requiring insurers to openlyjustify the use of education and occupation data in setting rateswill ensure that New Yorkers are not being charged higher rates dueto factors outside their control as drivers."

Some, but not all, insurers in New York use an individual'seducation level or occupational status in establishing initial tierplacement, the DFS investigation revealed. As a result, DFSbelieves that classes of insureds have been placed in lessfavorably rated tiers, which may lead to higher premiums, withoutsufficient actuarial support that an individual's education level,occupational status, or both, related to the individual's driving ability or habits in sucha way that the insurer would have a different risk of loss.

'Excessive, inadequate or unfairlydiscriminatory'

The proposed regulation prohibits an insurer from using drivers'occupational status or education level as a factor in initial tierplacement, unless the insurer demonstrates, to the satisfaction ofthe Superintendent of Financial Services, that its use ofoccupational status or educational level attained in initial tierplacement or tier movement does not result in a rate that violatesinsurance law provisions ensuring the public welfare by regulatinginsurance rates so they are not excessive, inadequate, or unfairlydiscriminatory.

The proposed regulation, which is subject to a 45-day notice andpublic comment period following the May 17, 2017, publication inthe New York State register, provides 180 days for insurers thathad been using education level and occupational status in initialtier placement and tier movement to amend their multi-tier ratingprograms and tier movement.

A copy of the proposed regulation can be found on the N.Y. State Department of Financial Serviceswebsite.

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