Proposal in Congress would eliminate non-driving factors in car insurance pricing

Bill would ban consideration of non-driving factors that, as a Sun-Times investigation found, some insurers use — including gender, home ownership and credit scores.

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A bill that would make it illegal for car insurance companies to base rates on anything other than a person’s driving record has been proposed in Congress.

It aims to remove a host of non-driving factors that, as a Chicago Sun-Times investigation in May found, some insurers use — including gender, home ownership and credit scores — from the calculus of insurance pricing.

“Car insurance is absolutely necessary for most American families, so when companies raise rates for unfair, undisclosed and unproven reasons, families are going to be hurt,” said U.S. Rep. Bonnie Watson Coleman, D-New Jersey.

She introduced Prohibit Auto Insurance Discrimination Act, or PAID Act, with Rep. Rashida Tlaib, D-Michigan.

“Income proxies — like where you work or whether you have a college degree — don’t weed out bad drivers,” Watson Coleman said. “They just create a two-tier system where those who make less get charged higher rates. Working families deserve better than a system that is fundamentally unfair.”

The proposal would make it illegal to consider these things in calculating car insurance rates or deciding whether drivers are eligible to be insured:

  • Education.
  • Occupation.
  • Employment status.
  • Home ownership .
  • Credit score or credit report.
  • Gender.
  • ZIP code or adjacent ZIP codes.
  • Census tract.
  • Marital status.
  • Previous insurer.
  • Prior purchase of insurance.
U.S. Rep. Bonnie Watson Coleman.

U.S. Rep. Bonnie Watson Coleman: “Income proxies — like where you work or whether you have a college degree — don’t weed out bad drivers. They just create a two-tier system where those who make less get charged higher rates.”

House of Representatives

Tlaib, whose district includes part of Detroit, said automobile insurers’ use of non-driving factors is “modern-day redlining.”

“The use of non-driving factors puts marginalized communities at a disadvantage and creates obstacles to economic opportunity for families,” she said.

The Sun-Times found widespread variances in quoted prices for car insurance based on non-driving factors such as gender, home ownership, education level, occupation and ZIP code. Quotes for a driver with a combination of non-driving factors that insurers red-flag were as much as $613 more a year for the same insurance, the Sun-Times found — even with the same make and model of car and spotless driving records.

That reporting was based on more than 300 online price quotes from seven major insurers, and it covered bodily injury/property damage insurance, which Illinois law requires drivers to have. The quotes did not include collision or comprehensive coverage for things like vandalism, car break-ins or theft — factors that might be affected by where a person lives.

With many car insurers, the disparities were baked into their pricing formulas.

An insurance industry group representing major automobile insurers didn’t dispute the findings but said the way its members set their rates isn’t discriminatory but instead based on claims data. By law, insurers can’t use race, ethnicity or religion in setting prices. The industry argues that any variation in pricing is justified by the companies’ historical data showing how much risk a given group of drivers poses.

Insurers also say that adding regulations might result in them pulling out of unprofitable areas.

Illinois is known for relatively light insurance regulation, which the industry says results in greater competition that consumers can take advantage of by diligently shopping around for lower prices.

David Snyder, vice president of policy and research of the American Property Casualty Insurance Association, an industry group, said the proposed legislation in Congress “will not reduce consumers’ insurance costs. In fact, it could have the opposite effect, causing millions of drivers in virtually every state to pay more for auto insurance.

“By using a variety of rating factors, insurers are able to develop a more complete picture of a driver’s potential for filing a claim and in this way more accurately price the policy,” Snyder said.

He said state motor-vehicle records are not always reliable, which means insurers need more information to get a fuller picture of a given driver’s risk.

U.S. Rep. Rashida Tlaib.

U.S. Rep. Rashida Tlaib: Automobile insurers’ use of non-driving factors is “modern-day redlining.”

House of Representatives

The association says high costs for litigation, medical expenses and auto repairs, as well as insurance fraud, have pushed up the cost of car insurance.

The Consumer Federation of America backs the proposed legislation in Congress, saying it’s needed because many states haven’t taken steps to protect against discriminatory pricing practices.

For millions of people, mandatory auto insurance “is completely unaffordable because state lawmakers and regulators defer to the insurance industry, rather than fight for consumers,” the federation’s Douglas Heller said.

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