Federal Regulation

Senate’s Booker Bill Will Go A Long Way to Prohibit Unfair Discrimination in Auto Insurance

Washington, D.C.—The United States Senate should hold hearings on auto insurance reform legislation introduced today by Senator Cory Booker (D-NJ), the Consumer Federation of America (CFA) said in a statement of support for the bill. The Prohibit Auto Insurance Discrimination (PAID) Act would prohibit insurers from using certain socio-economic characteristics of drivers when determining eligibility for and the price of auto insurance.  The reform takes on the key elements of insurance rating and underwriting that have perpetuated systemic racism in the auto insurance marketplace, according to CFA, which, earlier this year, highlighted the correlation of several rating factors used by auto insurers to race and ethnicity.

Under the proposed legislation, which is a companion to H.R. 3693 (Watson-Coleman, NJ; Tlaib, MI), insurance companies would not be allowed to use “income proxies such as a driver’s education level, occupation, employment status, home ownership status, credit score, consumer report, previous insurer, and prior purchase of insurance” when setting rates or deciding whether or not to provide coverage to consumers.

CFA’s insurance expert Doug Heller said,

“Senator Booker’s introduction of the PAID Act is an important step in the direction of addressing the unfair practices and systemic biases that make auto insurance more expensive for drivers of color and lower-income Americans. Almost every state in the nation requires that all drivers buy insurance, but most states have done little to ensure that good drivers get a fair price regardless of their socio-economic status. Because of the mandate to purchase coverage, government has a special obligation to ensure that the market for auto insurance is fair and affordable.

“Insurers across the nation use a variety of personal and economic factors that unfairly discriminate against people for reasons that have nothing to do with their driving records. This makes auto insurance more expensive and less accessible to millions of Americans and has the additional effect of increasing the number of uninsured motorists, which raises premiums for everyone on the roads. People should be rated on how they drive, not their job title or if they lost their job; not whether or not they went to college; or whether they rent or own their home; or if their credit score has fallen. The legislation by Senator Booker and Representatives Tlaib and Watson-Coleman will make auto insurance fairer and more affordable for good drivers everywhere. The PAID Act should be a priority for Congress, and it can also serve as a model for state lawmakers and regulators who are serious about taking on the persistent systemic bias in insurance markets.”

In March, CFA’s Heller testified before the House Financial Services Subcommittee on Housing, Community Development, and Insurance on the subject “Drivers of Discrimination: An Examination of Unfair Premiums, Practices, and Policies in the Auto Insurance Industry.” That hearing is archived here and Mr. Heller’s testimony is here.

Contact: Doug Heller, 310-480-4170