Bill To Ban Job, Education Rating In N.J. Stalls

New Jersey legislation intended to bar the use of occupation and education in setting motorists' auto insurance rates failed to secure enough votes to clear a Senate committee yesterday.

The measure, which insurance advocates argued would set back auto reform legislation, was pushed by Sen. Nia H. Gill, D-Montclair, who argued the use of such factors in underwriting has a discriminatory impact on racial minority and low income groups.

Sen. Gill chairs the Senate Commerce Committee. On the question of whether to release the bill for full Senate action the panel voted 1-1 with three abstentions. The bill remains in the committee.

The measure (S 1714) would bar the use of occupation and education in personal lines underwriting.

Richard Stokes regional manager for the Property Casualty Insurers Association of America, before the vote had issued a statement decrying the bill as "a major step backward from the auto insurance reforms passed in 2003 that are helping to increase competition and drive down rates."

"Consumers don't benefit when arbitrary restrictions are placed on actuarially justified underwriting factors," he said.

Vince Matthews, Sen. Gill's legislative and communication director, said at yesterday's hearing legislators were concerned that the state Department of Banking and Insurance was unable to say whether discrimination does or does not take place using occupation and education as a criteria in underwriting.

"There may be a disparate impact on minorities, and the department has never done a study," said Mr. Matthews. "There-in lies the issue."

Jim Gardner, a spokesman for the DOBI, said the department examined the actuarial soundness of the companies' underwriting and found no fault with it. He said neither the companies nor the department collects data on race or income, noting that to do so would be illegal.

"It is a blind process," he said.

He added that companies use a number of different rating criteria in their underwriting and that no single criterion would outweigh all the rest.

"Companies have spent decades collecting information and developing these models," said Mr. Gardner. "They've done so with the intent to get an edge on the competition."

Sen. Gerald Cardinale, R-Cresskill, who voted against the bill, said he did not believe the use of occupation or education was being used as a proxy for racial discrimination. He added that it is possible an argument could be made that any of the criteria used by underwriters could have an adverse effect on minorities.

"Unless there is a very good reason to do so, the legislature should keep its nose out of the business models of insurers in New Jersey," he said.

New Jersey Citizen Action said it performed a survey of 400 rate quotes and that those who did not have a college degree received a quote 19 percent higher than those with a degree. Individuals in nonprofessional jobs received quotes 27 percent higher than those in a professional job.

Mr. Cardinale called the report "a big waste of time."

"If you are less of a risk, then that is the way it is; it's the law of the marketplace," he said, noting that the companies have never hidden their use of data.

The bill's future remains in doubt; however, Ms. Gill, who is chairwoman of the committee, can reintroduce it anytime. "There are no plans for the bill at this moment," said Mr. Matthews.

Mr. Cardinale said the vote is an indication that it may not go further.

A companion bill in the Assembly (A 2819) was referred to the Assembly Financial Institutions and Insurance Committee a year ago.

Meanwhile, controversy over legislation to limit education and occupation in underwriting will likely continue in Florida where a spokesman for the Office of Insurance Regulation said legislation may be proposed to deal with the perception of discrimination against minority and low-income policyholders.