The Star-Ledger

Car Insurers Accused Of Bias

Critics say use of occupation and education discriminates by class, race

The Star-Ledger — Thursday, March 1, 2007

Star-Ledger Staff

Geico and 10 other New Jersey auto insurance groups are systematically discriminating against minority and blue-collar drivers by basing their rates on occupation, education or both, a coalition of civil rights, consumer groups and unions said yesterday.

In urging passage of a pending ban on the practice, the group unveiled a study of 449 rating examples that concludes drivers with at least a bachelor's degree and a professional job receive an average discount of 38 percent from Geico.

"This is a sophisticated way of redlining," said Dick Barber, treasurer of the New Jersey NAACP. "The data clearly shows it. Any way you cut it, it's discriminatory."

"I hope we are not distracted by the silly looking, trash-talking lizard," he added, referring to Geico's green mascot.

Rynthia Rost, a Geico vice president who visited the Statehouse to respond to the accusations, questioned the validity of an analysis by New Jersey Citizen Action and blamed angry competitors for trying to derail its efforts to gain market share.

The company insures 616,235 vehicles and ranks third in the state less than three years after it returned after a 28-year absence. She said the company saved drivers $120 million last year alone.

"If Geico was charging unfair rates, drivers would be flocking to our competitors and Geico would be shrinking, not growing in New Jersey," she said. "The simple fact is that Geico's education and occupational groupings are based on decades of data that show that people in some occupations or educational groups are less likely to have losses."

The Senate Commerce Committee on Monday will consider a bill (S-1714) that would ban the use of occupation or education for either rate-setting or underwriting.

Jaimee Gilmartin, spokeswoman for the Department of Banking and Insurance, said department officials have "serious reservations" about the bill because they think its scope is too broad, but they plan to carefully review Citizen Action's analysis and meet with concerned groups.

While Geico and other companies have based rates on occupation and education for several years in other states, the practice only began in New Jersey after 2003 legislation partially deregulated the market to lure in more companies and try to bring down the nation's perennially highest auto insurance rates. Industry officials contend the rating factors are intended only to more accurately match prices to each driver's potential risk.

"The best way for consumers to pay the right premium for them is to make sure companies are allowed to get as specific as possible to make sure they can offer the best rates," said Magdalena Padilla, president of the Insurance Council of New Jersey. "Consumers want the best rates available for themselves."

But Phyllis Salowe-Kaye, Citizen Action's executive director, said use of occupation and education has the same effect as setting insurance prices on race and income, which are illegal. In one example, her group found a 51-year-old woman in Camden with little education and a blue-collar job would pay $649, or 61 percent more, than if she was a well-schooled professional.

"While we all want a better insurance market in New Jersey, no one should want one at the expense of fairness and equality," she said.

Rost refused to say whether Geico might once again abandon the state if the legislative ban passes. She did say, however, "You want to go back to the days when there wasn't competition, when there were no companies? Reform works."

She added that Maryland insurance regulators last year concluded education and occupation are valid rating factors and absolved Geico of unfair discrimination charges. On the other hand, Florida insurance regulators held a hearing last month on the issue and may recommend legislation.

Electric Insurance Co. is the only firm besides Geico that bases rates on both occupation and education, according to the insurance department. AIG Premier Insurance and Selective Auto Insurance Company of New Jersey consider occupation.

AMEX Assurance, Esurance Insurance, Homeland Central Insurance, Liberty Insurance, two Liberty Mutual companies, Merastar Insurance and two New Jersey Skylands companies all use education.

Joe Donohue covers state government and politics.

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