Job, education underwriting factors under scrutiny in N.J.

New Jersey drivers could see a return to high prices and fewer choices for their insurance if legislators limit the use of occupation and education as rating factors, insurers warned lawmakers at a legislative hearing earlier this month.

Senate Bill 1714 would represent a “significant step backward for New Jersey, and it could very well be the first step toward a return to a moribund market,” said Paul Tetrault, state affairs manager for the National Association of Mutual Insurance Companies.

The legislation would prohibit insurers from using occupation and education in the underwriting process. But according to NAMIC, such restrictions could hamper competition and thereby hurt consumers.

Tetrault suggested the proposal could mean individuals in certain occupations, such as teachers, librarians, or office workers would pay more for insurance than they would otherwise. The measure might also restrict the operation of companies that that serve specific occupational groups and prevent insurance companies from offering students discounts based on good grades, he added.

Also testifying in opposition to the measure, the Property Casualty Insurers Association of America agreed that passing the bill would signal a “major step backwards a major step backwards from the auto insurance reforms passed in 2003 that are helping to increase competition and drive down rates.

Richard Stokes, regional manager and counsel for PCI, argued that the use of education and occupation to underwrite and rate insurance has been approved by various state regulators, most recently in Maryland, where the insurance department found that a company’s use of education and occupation was reasonably objective and confirmed that the use of these factors did not have a disparate impact on any protected class.

According to PCI, personal characteristics such as age, gender and marital status have long been recognized as accurate predictors of insurance loss. “Factors such as education and occupation are no different,” said Stokes.