The New York Department of Financial Services has finalized a regulation that protects drivers in New York from being subjected to discriminatory auto insurance rates.
For years, auto insurance providers in New York have been able to use individual’s private information, such as occupational status or educational level, as factors to determine rates.
The NY DFS has reached agreements with two major insurers regarding the new regulation.
“New York drivers who do not have a college degree or a high-paying job should not be penalized in the form of higher auto insurance rates,” Superintendent of Financial Services Maria T. Vullo said in the release.
Two major insurers that have been caught using discriminatory methods to determine rates, Liberty Mutual and Allstate, have already agreed to alter their rate-setting methods. Other insurers who have been using education level and occupation as a factor for setting rates will have a total of 180 days to comply with the regulations and revamp their programs.
"New York drivers who do not have a college degree or a high-paying job should not be penalized in the form of higher auto insurance rates," continued Vullo. "This regulation requires insurers to openly justify the use of education and occupation data in setting rates, ensuring that New Yorkers are not unfairly discriminated against and being charged higher rates due to factors outside their control or unrelated to driving ability."
According to the rules set by the DFS, insurance providers can no longer assign unemployed drivers higher-risk premiums on the basis of their employment status.
However, a spokesperson for the state insurance industry lobby warned lawmakers that the new regulations could cause insurance rates to increase overall.
"The state is traveling down a dangerous path by introducing subjectivity into insurance," said New York Insurance Association President Ellen Melchionni.
Auto insurance companies can still measure risk by considering driving-related factors that include drivers’ personal driving history, the type of car they drive, the annual mileage consumption and their age and gender.
DFS spokesman, Ron Klug was unable to indicate how many drivers in New York have been affected by higher premiums due to their occupational or educational status.
Even though the anti-discriminatory regulation has been passed, New York-based insurance providers maintain that the factor relating to job status and educational level helped predict the probability of an insurance loss and allowed for more precise rates to be set.
The superintendent has also put into question the use of credit histories when determining auto insurance premiums. However, the state of New York has allowed for credit histories to be factored in since 2004. Therefore, Vullo is unable to use her authority to overturn the rule.