Delaware Insurance Commissioner Outlaws ‘Widow’s Penalty’ in Setting Auto Insurance Rates

The Delaware Department of Insurance will no longer approve any auto insurance company’s rate submission that includes a “widow’s penalty,” under which a widow or widower is charged a higher rate based solely on the change in his or her marital status following the loss of a spouse, according to an announcement by Commissioner Karen Weldin Stewart.

“This so-called ‘widow’s penalty’ is completely unfair,” said the Commissioner. “Becoming a single driver because of the death of your spouse is not the same as being a young, inexperienced single driver. I will not approve any auto insurance rate filings that cannot provide actuarially sound data for including widows and widowers in a higher single rate category.”

Automobile insurers are permitted to charge inexperienced drivers, such as teenagers, a high premium because some actuarial studies show that young single drivers file more claims than young married drivers. However, the Delaware Insurance Department said it is not aware of any such data showing that older single drivers exhibit the same behavior when compared to older married drivers.

According to the agency, marital status is not the only reason why auto insurance premiums can change following the loss of a spouse. For instance, many companies offer multi-policy discounts for having both life and auto policies with that company. If one of those policies ends, such as a life insurance policy after a spouse dies, that discount may be cancelled. Also, a married couple on a policy might have their driving records considered together when determining the premium. When one spouse dies, the premium will change to reflect the risk of the remaining driver. If that driver has a better driving record than his or her spouse, the premium may go down. However, the reverse is also true.

The new policy, contained in Auto Bulletin No. 23, is effective immediately and is directed to all insurers writing automobile insurance coverage in Delaware. The new policy only applies to rate reviews going forward, so current policyholders should shop around and get quotes from other insurance companies if their auto premium has recently increased.

Source: Delaware Department of Insurance