The state regulator is considering implementing a ban on the use of a customer’s job to calculate premiums.
New York auto insurance premiums calculations may soon deviate from strategies used by most U.S. states. The industry regulator is currently deciding whether or not to ban the practice of using a customer’s occupation as a factor in calculating rates.
The New York Department of Financial Services has asked leading insurers why the practice is used.
It has requested this information from Allstate Corp., the Geico unit at Berkshire Hathaway Inc., Progressive Corp., and Liberty Mutual. The state Department of Financial Services has asked specifically why New York auto insurance companies should not be prohibited from using education and occupation as a factor in their pricing calculations.
This effort has thrown open the door to new debates regarding the various factors insurance companies use to calculate their rates. Consumer advocates, insurance companies and regulators are now each working to have their voices heard in this discussion. It would not only involve what should not be used to calculate rates, but would also consider which factors are indeed effective at identifying the risk associated with a specific driver.
Until this point, it has been the New York auto insurance companies that have been winning the argument.
The auto insurance industry has been able to use a large spectrum of factors such as gender and age to calculate rates. In many states, they can also use financial wellbeing such as a person’s credit score, to determine his or her risk as a driver. Actuaries insist that knowing a person’s occupation helps them to more accurately price their products.
What this means is that people with certain types of employment will end up paying lower premiums than others. For instance, engineers, accountants, dentists, teachers and military officers pay less each month for auto insurance than unskilled workers. Stock clerks and daycare employees are seen as people who are a greater risk behind the wheel, say certain actuaries.
A main argument being presented by New York auto insurance actuaries is that people with a tendency toward cautiousness tend to be attracted toward certain jobs. Therefore, people who are employed in those fields may be more careful while driving, lowering their risk. Furthermore, they have said that people who have higher paying jobs have a greater likelihood of paying for minor incidents themselves instead of making a claim.