Insurers Blast Florida Report on Education, Job Rating

April 3, 2007

Florida insurers are hammering a Florida Office of Insurance Regulation report on the use of occupation and education for rating of auto insurance policies, calling the report’s claims that the use of these factors unfairly affects lower income and minority consumers “entirely bogus and unsubstantiated.”

The Florida Insurance Council maintains that there is no unfair bias in the use of education and occupation by insurers.

“While critics argue that certain levels of educational attainment or occupation are associated with certain income levels, they fail to associate risk or cost with education or occupation,” the FIC stated in a release. “Once risk is associated, insurers have found that occupation and education are not only actuarially valid predictors of risk, but that they are not unfairly discriminatory.”

FIC cited a study last year by the Maryland Insurance Administration, which it says found that the use of education and occupation as underwriting factors is “reasonably objective; is a predictor of loss; meets actuarial standards of practice and principles related to risk classification; and is reasonable.”

The insurers’ group also noted that Florida’s policymakers recognize that the practice is acceptable since under Florida law, it is legal to use education and occupation.

In further defense, the group pointed out that no insurer uses education or occupation as the only factors in determining rates. Instead, they use as many as 20 different characteristics including territory, gender, make of car, driving record, miles driven, location, driving experience and others.

To restrict insurers’ ability to use such risk-based factors would harm consumers, insurers argue.

“Restrictions on actuarially predictive underwriting criteria would lead directly to more uncertainty and therefore less competition, higher prices and growth in auto insurance markets of last resort,” the FIC said.

Source: Florida Insurance Council

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