On January 1, Dave Jones, outgoing California Insurance Commissioner, banned the use of gender in setting insurance rates for passenger cars in all States. Although California is not the first state to do so, insurers and critics have said that this decision has the effect of warning one of the largest US industries that it may not be able to use such discriminatory practices in the future.
"These regulations ensure that auto insurance rates are based on factors beyond the control of the driver, rather than personal characteristics over which drivers have no control," Jones said in a statement. Car insurers have collected premiums of around $ 27.3 billion in 2017 in California in 2017, according to the California Department of Insurance.
Several other states already prohibit sex discrimination in auto insurance pricing, according to the Consumer Federation of America (CFA), a Washington, DC-based surveillance group that includes Hawaii, Massachusetts, Montana, North Carolina, Pennsylvania and parts of Michigan.
But California stands out because it also prohibits accepting, rejecting, or increasing candidate rates because of their academic status, job, or credit score. The state has also eliminated gender-specific pricing in health insurance.
Higher rates for some drivers?
Ending a gender-based insurance rating system was likely a fatality, because under a new law, California residents are no longer required to report their gender and can have it identified as " non-binary ", according to the CFA.
The auto insurers reacted by stating that "some consumers will have to start paying higher rates" because insurers are denied the most accurate data to "help cautious drivers pay less", according to Vice President Armand Feliciano from the American Property Casualty Insurance Association.
For example, men generally drive more than women and "often engage in risky driving practices, such as not using seat belts, driving while impaired and speeding up," he added.
The CFA claimed that recent studies show "despite misconceptions about the opposite", women pay more for auto insurance than men – especially after age 25 – which surprises most statisticians, as well as many insurers. But this could be based on factors other than driving skills, such as the finances or target group of clients of an automobile insurer.
"No one has explained why many insurers are charging more for women these days, but this is definitely happening," said Doug Heller, insurance consultant at CFA. "This is consistent with the broader insurance pricing model, based more on marketing and profit objectives than on risk assessment, which is a violation of the law in most states, but it is rarely taken into account by regulators. "
40 states allow it
Insurers could counteract by limiting or denying coverage in states prohibiting the use of sex and other factors to set premiums. "When the insurance regulator insists that auto insurers receive less relevant information about a motorist, they may choose to limit or suspend their business in that state," said Vice President Michael Barry, from the Insurance Information Institute, which represents automobile insurers. He noted that the use of gender as a rating factor had the approval of at least 40 state regulators.
Eric Poe, who runs Cure Auto Insurance, based in Princeton, NJ, said the sex of the plaintiff was only a minor factor in determining whether he was likely to have a car accident. Younger men and women were likely to fall into one of them, men being a little more exposed to accidents.
But Poe, a long-time advocate of not using discriminatory factors in pricing, said his real complaint concerned the use of the profession, a university degree and a four-year credit rating to decide who would get a policy and for how much. These factors are not based on drivers' ability but on their wealth, as the richest usually file fewer demands than the poorest, he said.
Poe also pointed to growing movements in California and New York, which also banned education and occupation as determinants of auto insurance premiums, as steps in the right direction.
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