WASHINGTON–Three property-casualty trade groups on Saturday made an impassioned plea before state legislators, defending the appropriateness of using education and occupation data in setting rates for personal lines products.
In a joint statement, the American Insurance Association, National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America told the state legislators that consumers benefit with lower rates, more choices and greater market stability when insurers are able to use such data.
Representatives of the three groups told members of the National Conference of State Legislators at their spring meeting here that such tools lead to "accurate underwriting." They called use of such data "objective and supported by statistical evidence."
The comments were made at a special hearing at the NCOIL meeting here, to discuss insurers' use of education and occupation data in the underwriting and/or rating of personal lines insurance.
The statement argued that insurers that choose to use education and occupation information do so for the same reason they use any other piece of demographic information–because the information is predictive of insurance loss and allows for more accurate underwriting and pricing.
"Limiting the use of actuarially justified rating and underwriting factors creates subsidies among consumers and eventually harms the marketplace by stifling competition and innovation," the statement said.
Representatives of the three groups told the legislators that "existing insurance laws and regulations and anti-discrimination laws in place in every state represent a careful balance that allows innovation and competition in risk assessment, but also prohibit unlawful discrimination."
To ban proven risk classification factors that are nondiscriminatory could upset this balance, the statement said.
The representatives also told the legislators that use of education and occupation information by insurers to underwrite and rate insurance has repeatedly been approved by various state regulators.
Specifically, they said, the Maryland Insurance Administration recently conducted an independent actuarial study of a national carrier's use of education and occupation.
The independent actuarial analysis and the administration's report concluded that the company's use of education and occupation was reasonably objective; demonstrated that education and occupation are valid predictors of loss; and confirmed that the company's use of these factors did not have a disparate impact on any protected class, the industry representatives said.
The representatives also cited a New Jersey Department of Banking and Insurance study of industry practices in the state that they said "reached many of the same conclusions."
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