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Insurance rates shouldn't be based on pay, education
By ATIMES EDITORIAL
Published April 18, 2007
When Robert Trigaux, the St. Petersburg Times business editor, tried an experiment and filled out an online application for a price quote for auto insurance from Geico, the results were shocking and troubling. In two separate tries he used exactly the same criteria except for the inquirer's occupation and level of education. The guy without a high school diploma and a janitor's job was given a quote that was $440 per year more than the Ph.D. computer executive. This is wrong. The use of educational attainment and occupation in rate-setting is unfair and should be outlawed. Such factors burden those who are least able to afford it. Florida has a serious uninsured motorist problem and this practice undoubtedly contributes to it. Auto insurance companies are defending the practice, claiming that it is actuarially sound. Even if that is true, it shouldn't matter. A recent report by the Florida Office of Insurance Regulation found that using education and occupation in rate-setting disproportionately harms minorities and low-income individuals. That should be reason enough for the industry to stop using the criteria. But since such corporate responsibility is rare, it appears that the Legislature will have to ban the practice. Kevin McCarty, Florida's insurance commissioner, points out that the Legislature dealt with a similar practice in 2003 when it barred the use of credit scoring in insurance underwriting. That practice also highly correlated with race and income level and had a disproportionate impact on minorities and the poor. The public policy interest in nondiscrimination is clear and overriding. Warnings to the auto insurance industry in 2004 by OIR that it should eliminate occupation and education as criteria in rate-setting have not been uniformly heeded. The agency needs express legislative authority to be effective, and lawmakers should grant it that power. Proxies for race and poverty should have no place on an actuarial table. If that means spreading risk to a wider customer base, it is a small price to pay for fundamental fairness.
[Last modified April 17, 2007, 21:42:14]
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by Jennifer
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05/14/07 01:57 AM
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Educated, tax paying, well employed citizens are just as guilty behind the wheel. Lawyers for example, drunk driving kings. These are well educated people. Bills' comments make no sense.
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by Ernie
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04/23/07 09:51 PM
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Most of us are required by State law or by our mortgage company to have insurance. The State is correct everyone should have insurance, but the State should also be required to make insurance companies act responsibly.
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by Jim
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04/19/07 06:26 AM
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Sally (reply from Jim), YOU try dealing with the state. And while you're at it, do it on a deadline. Good luck
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by Bill
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04/18/07 08:42 PM
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Responsibe behavior in school, on the job, and with your personal finances probably reflect a general sense of responsibility behind the wheel. btw..easy to tell who writes which op ed pieces.
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by BackToBasics
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04/18/07 05:06 PM
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I'm junking my car turning in my license, canceling my insurance and walking. Driving was fun when young but now it's a hassle and very expensive. Time to get my shopping cart out of storage. I'll get exercise and save mucho mula!
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by Tom
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04/18/07 03:52 PM
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Insurance is to theft like Insurer (agent) is to thief!!!!!!
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by tj
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04/18/07 03:06 PM
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home insurance companies also use credit worthiness to determine rates. I have horace mann and was told my rate increased due to a credit worthiness check. if it's illegal for auto insurance then why are they still doing it for homeowners too?
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by craig
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04/18/07 02:02 PM
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i was a 220 licensed agent for over 8 states for one of the largest car insurance firms. i saw first hand how rates could be manipulated. credit, education, anything but an actual driving history would be used to red line and get rid of/or raise rate
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by John
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04/18/07 01:49 PM
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I'll be paying off my student loans until my 52nd birthday and have worked hard to pay my bills on time - thus earning a good credit rating. If these combined efforts earn me nominal savings on my auto insurance - FANTASTIC!
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by Frank
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04/18/07 12:55 PM
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I disagree. People go to college to learn a trade and, hopefully, be better off than without an education. You are assuming "better off" is limited to salary. This is where I disagree. Other benefits can be tied to higher education.
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by Kurt
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04/18/07 12:11 PM
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Your editorial spreads the ignorance upon which it is obviously based. Insurance pricing is a form of legal discrimination that measures the likelihood of future loss. The only alternative is for central planners to pick favorites. That's fair?
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by Sally
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04/18/07 11:58 AM
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Hey Jim, sounds like lazy insurers to me! Sure it's easier to use other information, but this data has NOTHING to do with how someone actually DRIVES!
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by JT
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04/18/07 09:47 AM
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No one is harmed by accurate actuarial work.Instead proper rates are charged. Uninsured motorist crisis is caused by individuals breaking the law. Fundamental fairness is not better actuarial risks subsidizing social agendas.Go Start FEELGOOD INS CO.
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by Tony
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04/18/07 09:21 AM
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Ins. is required by law and they will cancel if it's not paid, yet when it comes time to pay for an accident it sometimes takes years to settle a case. Take the money and run and the state supports that. Ins. the biggest ripoff know to man.
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by Dan
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04/18/07 09:04 AM
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Can anyone explain to me how a credit score or education level have anything to do w/ "harming minorities"? Minorities have the same educational and financial opportunities as everyone else. Are you saying they lack the ability to achieve?
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by Jim
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04/18/07 04:54 AM
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Auto insurers would love to use the driver's actual safety record, but dealing with the agencies who monitor and store this data is an abomination, thus they use proxies such as zipcode, creditworthiness and employment status. It's the state, stupid
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