Industry representatives clashed with each other and consumer groups Monday before a New Jersey legislative hearing considering a ban on job and education status as personal lines underwriting criteria.
Legislators began questioning the use of such information after it came to light through press reports that GEICO uses the information as part of its underwriting criteria.
In testimony before the New Jersey Senate Commerce Committee, Property Casualty Insurers Association of America regional manager Richard Stokes discussed the positive impacts of the auto reforms of 2003 and the need for insurers to use tools that will assist them in providing lower and more stable rates for New Jersey drivers.
Consumers benefit when insurers seek to find more accurate, objective and actuarially justified underwriting and rating criteria, such as education and occupation, said Mr. Stokes.
Earlier this month, PCI released a report that showed since the reforms were signed into law, 17 new companies have entered the state's marketplace, the number of top 20 national companies has doubled, and over 1,500 new agents have been appointed by carriers throughout the state.
"We have also seen $343 million returned to policyholders and 47,000 new drivers, providing an additional $58 million to support the system," Mr. Stokes said.
Paul Tetrault, Northeast regional manager for the National Association of Mutual Insurance Companies, said that "placing restrictions on insurers' ability to underwrite would threaten to reverse the substantial gains achieved and would therefore constitute a misguided step backward for New Jersey."
Eric Poe, representing the not-for-profit direct writer NJCURE, disagreed.
"This is different from other rating factors used because it has a socio-economic influence to it," he said.
Mr. Poe stressed that in 2003 insurers recorded their second highest profitability in ten years without one insurer using job and education status as rating criteria.
Phyllis Salowe-Kaye, executive director for New Jersey Citizen Action, said, "GEICO's underwriting guidelines not only directly harm lower-income Americans, but have an indirect negative affect on minority customers."
Vince Matthews, spokesman for Sen. Gill, said the committee will probably take up the measure in the autumn.
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