Discrimination in Insurance Underwriting
A report from the Florida Office Of Insurance Regulation (FLOIR) finds that minorities are facing an unintentional discrimination when insurers use education and occupation as part of their auto insurance underwriting criteria, says an article in the Tampa Bay Business Journal.
Auto insurance is a very competitive business. As a result, underwriting practices used by one insurer tend to spread quickly, as competitors attempt to level the playing field. This was a primary concern for FLOIR when looking at the use of education and occupational information in car insurance underwriting.
The problem with the use of education level and occupation is similar to the problem with using a person's credit score as part of the underwriting process; these types of information will clearly impact those who are already under financial pressure.
FLOIR has been following the practice prior of using education and occupation since 2004, when FLOIR informed the insurance industry that use of these factors was at best questionable. At that time, the industry was warned to stop using these criteria within a year. Since then, FLOIR has held hearings on the practice and their report reflects the outcome of those hearings, held on February 9th in Tallahassee.
A number of insurers were called to testify, including big players in the Florida insurance market such as AIG, Liberty Mutual and GEICO. All insurers claimed they were using education and occupation in a "color-blind" way because they don't collect either race or income information. However, the companies did admit that they haven't researched whether there is any impact on minorities or disadvantaged groups by using these factors.
Monique L. Attinger