Proposed DFS Regulation Prohibits Educational Level or Occupational Status as Factors in Setting Auto Insurance Premiums
Education and Occupation Discrimination Penalizes Drivers Without College Degrees or Who Work in Low-Wage Jobs or Industries
Governor Andrew M. Cuomo today announced a proposed regulation to protect New Yorkers from excessive and unfairly discriminatory auto insurance rates. Following an extensive investigation, the Department of Financial Services regulation prohibits insurers from using an individual’s occupational status or educational level as factors in setting rates, unless the insurer demonstrates to the satisfaction of the Superintendent of Financial Services that the use of these factors does not result in rates that are unfairly discriminatory.
"This new protection cracks down on this unfair practice that soaks drivers for not having a college degree or a high-paying job," Governor Cuomo said. "These metrics are discriminatory, have no relationship to how good a driver you are and should not be used as an excuse to overcharge New Yorkers."
The use of education and occupation in determining insurance rates can penalize drivers without college degrees or who work in low-wage jobs or industries. The result is that drivers with higher education and income pay less for auto insurance with no evidence that they are better drivers. DFS’s multi-year investigation revealed that education and occupation were used without a clear demonstration of the required relationship between these factors and driving ability.
Financial Services Superintendent Maria T. Vullo said, “Under this proposed regulation, auto insurers cannot use educational and occupational status in their insurance underwriting, unless they can clearly demonstrate a plausible relationship to the risk of loss. Requiring insurers to openly justify the use of education and occupation data in setting rates will ensure that New Yorkers are not being charged higher rates due to factors outside their control as drivers.”
The DFS investigation revealed that some, but not all, insurers in New York use an individual’s education level and/or educational status in establishing initial tier placement. As a result, classes of insureds have been placed in less favorably rated tiers, which may lead to higher premiums, without sufficient actuarial support that an individual’s education level and/or occupational status related to his or her driving ability or habits in such a way that the insurer would have a different risk of loss.
The proposed regulation prohibits an insurer from using drivers’ occupational status or education level as a factor in initial tier placement, unless the insurer demonstrates, to the satisfaction of the Superintendent of Financial Services, that its use of occupational status or educational level attained in initial tier placement or tier movement does not result in a rate that violates Insurance Law provisions ensuring the public welfare by regulating insurance rates so they are not excessive, inadequate, or unfairly discriminatory.
The proposed regulation, which is subject to a 45-day notice and public comment period following the May 17, 2017 publication in the New York State register, provides 180 days for insurers that had been using education level and occupational status in initial tier placement and tier movement to amend their multi-tier rating programs and tier movement.
A copy of the proposed regulation can be found here.