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Insurance Profiling Faces Ban

Apr 2, 2007

By Kevin Begos, Tampa Tribune, Fla.

Apr. 3--TALLAHASSEE -- Florida regulators are preparing draft legislation to ban the use of education and occupation in setting auto insurance rates they say leads to higher rates for minorities.

The move comes after a report found that the practice "unintentionally harms minorities and low-income individuals." For example, some white-collar professionals get better rates, even though some blue-collar laborers tend to have fewer accidents.

"Just because something might be legal doesn't make it right," Chief Financial Officer Alex Sink said in response to the report issued Monday.

The report by Office of Insurance Regulation found that some insurers use educational and occupational information to set rates, and customers who are penalized often don't know they're being placed in a more expensive policy.

The price differences can be substantial.

One comparison done by regulators found that with sample drivers who had identical records and vehicles, a blue-collar worker was quoted $884.84 for a six-month policy, while a professional came in at $714.04.

In another case, the blue-collar worker was quoted $4,225.36; a professional, $1,403.59.

The report found that the practice is legal under Florida law and that insurers aren't intentionally discriminating.

But they "may be turning a blind eye" to the effect of what is actually occurring, said Steven Parton, general counsel for the Office of Insurance Regulation. He said the agency hopes to have draft legislation ready to present to the Legislature in about a week.

Insurance Consumer Advocate Bob Milligan said the situation should be fixed "through quick legislative action and appropriate rulemaking," but it wasn't clear whether Gov. Charlie Crist would make that a priority.

"I'm pretty much an advocate for the minority in our state as it relates to civil rights, restoration of rights, things of that nature. So I would always encourage fair and equitable treatment of all our citizens whatever form that might take," Crist said Monday when asked about the insurance issue.

Geico, the third-largest auto insurer in the state, uses education and occupation in setting rates. A company spokeswoman did not immediately have a comment regarding the report but pointed to past statements.

At a hearing held in Tallahassee in February, Geico officials vigorously disputed that their rates discriminate, noting that they don't -- and don't want to -- collect information about race from policyholders.

"We write working-class drivers across all of Florida," said Hank Nayden, a Geico vice president. "They are buying and they are staying with Geico." He said that if the company was pricing coverage unfairly, people wouldn't be switching to the fast-growing company.

Parton said state regulators don't have a specific legislator in mind who they hope will champion the bill.

House Speaker Marco Rubio, R-Miami, hasn't seen the report yet so couldn't comment, his spokeswoman said.

If the Legislature doesn't act, the report said the practice of using education and occupation to set rates appears poised to increase.

Some companies don't do it now but fear that if competitors do, they will have to. That's because industry analysts report the practice can help identify consumers who are more likely to file claims.

But state regulators suggest that's because members of wealthier professions tend to pay some claims out of pocket without reporting them.

Reporter Jerome R. Stockfisch contributed to this report. Reporter Kevin Begos can be reached at (850) 222-8382 or kbegos@tampatrib.com.

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Copyright (c) 2007, Tampa Tribune, Fla.

Distributed by McClatchy-Tribune Business News.

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