N.Y. Finalizes Regulation to Protect Drivers from Unfair Auto Insurance Rates

The New York Department of Financial Services (DFS) has finalized a regulation that protects New York drivers from unfairly discriminatory auto insurance rates and has already reached agreements with two major insurers regarding the regulation.

Liberty Mutual and Allstate have reached agreements with DFS in compliance with the regulation and have taken steps to eliminate any continuing impact of their prior use of education level attained and/or occupational status in initial tier placement, according to a DFS press release.

“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.

The new regulation prohibits insurers from using an individual’s occupational status or educational level as factors in setting rates, unless the insurer demonstrates to Vullo that the use of these factors does not result in rates that are unfairly discriminatory.

“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,” Vullo said in the release.

The use of education and occupation in determining insurance rates can penalize drivers without college degrees or who work in low-wage jobs or industries. The result is that drivers with higher education and income pay less for auto insurance with no evidence that they are better drivers, the release said.

This regulation comes after DFS conducted a multi-year investigation revealing that some, but not all, insurers in New York use an individual’s education level and/or educational status in establishing initial tier placement without a clear demonstration of the required relationship between these factors and driving ability.

As a result, classes of insureds have been placed in less favorably rated tiers, which may lead to higher premiums, without sufficient actuarial support that an individual’s education level and/or occupational status relate to his or her driving ability in such a way that the insurer would have a different risk of loss, the release stated.

The final regulation provides 180 days for insurers that had been using education level and occupational status in initial tier placement and tier movement and have not already reached agreements with DFS in compliance with the regulation to amend their multi-tier rating programs and tier movement.