NCOIL To Probe Impact Of Job, Education On Risk

The fairness of rating auto insurance customers using their job title and education level will be investigated by the National Conference of Insurance Legislators, NCOIL said.

Their decision came at the organization's annual meeting Nov. 21 at Duck Key, Fla. The group also decided to hold a special session on the issue at the 2009 NCOIL Spring Meeting

Speaking of legislators' concerns with the emerging practice, incoming Property-Casualty Insurance Committee Chair Tennessee State Rep. Charles Curtiss, D- Sparta, said, "This is fundamentally a consumer protection issue. We will hear that the level of a person's schooling or the nature of his or her job has some worth. But we are called on, as elected officials, to determine whether insurers have the right to use these factors, whether strong restrictions are appropriate, or whether this form of underwriting simply goes against the public interest."

NCOIL said that insurers that use education and occupation treat more favorably a person with a higher degree and/or a white-collar job than they treat someone with a high school education and/or a blue-collar profession.

Carriers, it was noted do not widely use the practice. NCOIL said insurers say these underwriting considerations accurately predict the likelihood of filing a claim and so are justifiable tools.

NCOIL said consumer groups and other critics argue that use of education and occupation is unfair because it serves as a proxy for income and ethnicity and because it ignores important variables regarding why a person chose to end his education or take a blue-collar job. Opponents say that lawmakers should prohibit such underwriting, as they have prohibited the use of race, according to NCOIL.

Last year legislation was introduced in New Jersey that intended to bar the use of occupation and education in setting motorists' auto insurance rates, but it failed to secure enough votes to clear a Senate committee.

Representatives of the American Insurance Association (AIA) and Consumer Watchdog, who attended the Nov. 21 NCOIL meeting were questioned on the issue.

A spokesman for the National Association of Insurance Commissioners (NAIC) acknowledged that states have taken little action on the issue and said that legislative guidance would be helpful.

NCOIL said examination of education/occupation is consistent with the organization's ongoing interest in factors that contribute to underwriting and rating.

In November 2002 NCOIL adopted a model law that would provide guidance and consumer protections when insurers use consumer credit experience. Twenty-six states have based their legislation and/or regulation on the model.

The NCOIL Spring Meeting will be held Feb. 27 through March 1 2009 at the Hyatt Washington on Capitol Hill in Washington.