Yesterday, Insurance Commissioner Nonnie Burnes proposed to ban some
but not all discriminatory or unfair rating and underwriting factors
under a new set of auto insurance regulations, and failed to adopt
other vital consumer protections in the regulations.
While MASSPIRG and the Center for Insurance Research are
pleased that the Commissioner has banned some unfair rating and
underwriting factors, the Commissioner has opened the door to the use
of a slew of other unfair factors that have nothing to do with a
consumer’s driving record. Also of great concern is that despite the
Commissioner’s stated reservations about the use of credit scores in
insurance, her regulations do not prevent an insurer from using credit
scores as a factor in determining whether to reject a driver for
coverage altogether.
For the first time in over 30 years, insurance companies will
be allowed to use discriminatory factors in selling auto insurance.
While banning some of the most obviously unfair factors, the proposed
regulations permit insurers to use many other factors that could harm
low-income and minority drivers, including factors that act as proxies
for the very factors banned by the Commissioner. In order to protect
against discrimination and to ensure that driving record is the primary
factor insurers use in setting premiums and in underwriting, it is
necessary for the Commissioner to list expressly all the rating and
underwriting factors that may be used by insurers.
Furthermore, credit scores and information gathered from
consumers’ credit reports have only been temporarily prohibited for
rating purposes and have not been restricted at all for use in denying
coverage altogether. Earlier this month 10 consumer groups urged the
Commissioner and the Governor to ban the use of all socioeconomic
rating and underwriting factors such as credit scores, which have
nothing to do with an individual’s ability to drive and which correlate
with a consumer’s income level and race.
Consumer Improvements to the Proposed “Managed Competition” Regulations
1.
To protect consumers against unfair and discriminatory practices and to
improve the ability of regulators to protect consumers, the
Commissioner should expressly list all the rating and underwriting
factors that may be used by insurers. A motorist’s driving record and
experience should be the only factor an insurer can use to deny
coverage altogether.
2. Rates and products should be standardized, uniformly
disclosed, and made accessible to the public on the Division of
Insurance’s website. Each insurer’s underwriting methodology should be
available on the website for public access.This will allow consumers to
make informed choices and allow regulators to catch new unfair or
discriminatory rating and underwriting factors.
3. Credit scores and all other socioeconomic factors must not be allowed for use in underwriting or rating.
4. The Commissioner should mandate a comprehensive plan to
reduce our highest in-the-nation accident rate, which is the single
largest factor driving our premiums. Without such a plan, consumers
will fail to see any meaningful rate reductions in the long term.
For more information – www.masspirg.org
This proposed regulation will be the subject of a public hearing
on Thursday, September 20, 2007 at 10:00 am at the Division of
Insurance, One South Station, Hearing Room A (5th Floor), Boston,
Massachusetts. All interested parties are encouraged to review this
regulation and attend the public hearing or submit their suggestions
and comments to me through the Docket Clerk at the Division of
Insurance (c/o Docket Clerk, Division of Insurance, One South Station,
Boston, MA 02110-2208).
