Department of Financial Services, OIR - Insurance Regulation  


  • The Use Of Occupation and Education As Underwriting Factors To Determine Motor Vehicle Insurance Premiums CASE NO.: 88544 -06

    IN THE MATTER OF:

    The Use Of Occupation and Education

    As Underwriting Factors To Determine                                                                                           CASE NO.: 88544 -06

    Motor Vehicle Insurance Premiums

    _____________________________________/

    NOTICE OF HEARING

    TO: ALL PROPERTY AND CASUALTY INSURERS

    LICENSED TO WRITE PRIVATE PASSENGER AUTOMOBILE INSURANCE IN FLORIDA

    NOTICE IS HEREBY GIVEN to all persons concerned that, pursuant to Sections 624.307, 624.324, 624.404, 624.413, 627.031 and 627.0651, Florida Statutes, the Office of Insurance Regulation (“OFFICE”) will hold a public hearing on February 9, 2007, at the Larson Building, 200 East Gaines Street, Room 116, Tallahassee, Florida beginning at 9:30 a.m. until conclusion.

    The purpose of the hearing is to consider the practice, currently used by several automobile insurance companies licensed to do business in Florida, of using occupation and education as underwriting factors to determine premiums paid by policyholders.

    In 2000, the National Association of Insurance Commissioners (“NAIC”) initiated a Race-Based Premium Working Group to examine the use of race-based premiums for life insurance. The OFFICE was an active participant in this endeavor, which included a questionnaire to all life insurance companies nationwide about past practices. This ultimately resulted in several multi-state market conduct examinations, and multi-million dollar settlements to correct past wrongdoing. The review period varied based on the company, but often included 1900-1970. Historically several life insurance companies blatantly discriminated against non-Caucasians.

    According to one multi-state examination report concluded by Maryland, after the race question was deleted from the application in the 1960s, several companies “appeared to use occupation as a substitute for race.” Occupations subject to substandard rating included maids, bootblacks, busboys, car wash workers, garbage or ash collectors and janitors. The multi-state report noted that “non-Caucasian workers were disproportionately represented in the [these] disadvantaged occupations.” In a similar examination conducted by the State of Ohio on Nationwide Life Insurance Company, one precursor company introduced education as a factor to discriminate against minorities.

    Although racial differences between education and occupation have narrowed since the period examined during the race-based life insurance premiums initiative, U.S. Census Bureau data (contained herein) indicates that a wide gap still exists.

    Source: U.S. Census Bureau’s comprehensive study of race/ethnicity and occupation for its Survey of Income and Program Participation: Field of Training and Economic Status: 1996:

     

    Occupational Field

    Hispanic

    African-American

    Caucasian

    Managerial

    6.3%

    9.8%

    14.5%

    Professional

    6.9%

    10.3%

    15.4%

    Technical

    2.1%

    2.9%

    3.3%

    Sales

    9.2%

    8.9%

    12.5%

    Clerical

    13.5%

    16.8%

    14.3%

    Service

    20.6%

    22.3%

    12.9%

    Farming

    6.6%

    1.9%

    3.0%

    Craft

    12.1%

    7.5%

    10.8%

    Production

    22.6%

    19.6%

    13.3%

    TOTAL

    100.0%

    100.0%

    100.0%

     

     

    Source: U.S. Census Bureau’s report, Other Data from the Educational Attainment 2000, issued August 2003:

     

    Race

    Percent with Bachelor’s

    Percent with Advanced

    Caucasian

    26.1%

    9.5%

    African-American

    14.3%

    4.8%

    Native American

    11.5%

    3.9%

    Asian

    44.1%

    17.4%

    Hawaiian, Pacific Islander

    13.8%

    4.1%

    Other Race

    7.3%

    2.3%

    Hispanic, Latino (any race)

    10.4%

    3.8%

     

    These proceedings will be used to determine whether or not occupation and education correlate with risk and what impact these underwriting practices have on minorities and lower income Floridians. Documents, presentations and testimony at this hearing will also focus on whether or not rates based in whole or in part on occupation and education are actuarial measurable, credible and sufficiently related to actual or expected loss and expense experience. The OFFICE is committed to protecting policyholders and the public against the adverse effects of excessive, inadequate, or unfairly discriminatory insurance rates and will determine, through the testimony presented, the impact of these underwriting practices on minorities and lower income Floridians.

    PLEASE BE GOVERNED ACCORDINGLY.

                                                                                                    ___________________________

                                                                                                    KEVIN M. MCCARTY

                                                                                                    COMMISSIONER

                                                                                                    Office of Insurance Regulation

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