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NCOIL to Examine Educational, Occupational Discounts

The National Conference of Insurance Legislators will schedule a special session to examine the extent to which states can or should permit the use of...
December 2, 2008

The National Conference of Insurance Legislators will schedule a special session to examine the extent to which states can or should permit the use of education and occupational factors in insurance underwriting. While statutory restrictions that demand rates not be discriminatory are widespread and long-standing, commissioners have had little legislative guidance on whether discounts or surcharges granted on the basis of an applicant's education or occupation should be prohibited. "There's very little in state laws that could guide them along those lines," said Eric Nordman, director of research for the National Association of Insurance Commissioners (NAIC). "In fact, there are very few state laws that would prohibit the use of either occupation or education as rating factors."

The use of education and occupation as underwriting criteria is beginning to stir controversy. In April 2007, the Florida Office of Insurance Regulation deemed insurers' use of the factors in underwriting private passenger auto insurance to be "highly correlated to race and income level," though it did not find any companies actually broke the law.

"It seems to me, going down this road, we're going to have the best rates for insurance executives with master's degrees, perfect credit scores and who drive one mile to work," said state Sen. David E. Bates (R-R.I.), who proposed the topic as a special NCOIL agenda item. Consumer advocate Carmen Balber, of the California-based group Consumer Watchdog, said "We decided decades ago that basing insurance rates on race, even though that's actuarially sound, was not good public policy, and I think we need to go the same way on education and income."