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EDITORIAL: When Bias Results, Review the Input: OUR OPINION: CHALLENGE INSURERS' USE OF JOBS, EDUCATION FOR RATES

Apr 8, 2007

By The Miami Herald

Apr. 9--If a mechanic and a lawyer are the same age, have similar driving records and drive the same kind of car, they should pay roughly the same amount for auto insurance, right? Not necessarily. A report by the Florida Office of Insurance Regulation says that some auto insurers use education and occupation as factors for determining rates, and that the result can be wildly different premiums for people with similar driving experiences. (Read the report at transcriptv1.pdf.)

Discriminatory practice

The report found that the insurers' methods "unintentionally harm" minorities and low-income residents, who end up paying higher rates. Insurance Commissioner Kevin McCarty says that, although the practice is legal under current Florida law, state lawmakers may want to review the situation. "This practice creates unintended effects that policymakers may find unacceptable," he said. We wholeheartedly agree.

The insurance commissioner's report focused on the activities of three auto insurers in Florida, GEICO, Liberty Mutual and AIG. Without legislation that forces restraint, however, other insurers surely will follow suit -- for competitive or other reasons.

In years past, auto insurers have used credit scores to determine rates, another policy that was found to be discriminatory. But that practice has been outlawed in some states; and in 2003, the Florida Legislature passed a law that put limits on insurers' use of credit scores for auto-insurance rates. Although the three insurers under review said that they used education and occupation in a way that was "colorblind," they acknowledged that they had not reviewed the impact of the policies on minority and low-income customers.

By way of background, Mr. McCarty's report mentions two other points that legislators should factor into their considerations. The first is Florida's history of slavery, Jim Crow laws and discrimination.

"While Florida leaders have since prohibited the use of factors such as race in determining employment and housing decisions, some vestiges of discrimination remain," the report noted. The report also said that Florida's rich culture and ethnically diverse population are among its greatest strengths.

Treat all customers alike

As was the case with credit scores, it isn't likely that insurers will change these policies without prodding and/or legal strictures from the Legislature. State lawmakers should review the data and adopt methods that encourage -- forcefully, if necessary -- auto insurers to treat their customers without bias.

Discrimination on the basis of race or income is wrong, no matter how it begins. Lawmakers should pass a bill that makes that clear to all insurers.

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Copyright (c) 2007, The Miami Herald

Distributed by McClatchy-Tribune Business News.

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