Financial Services Superintendent Maria T. Vullo today announced that a third major automobile insurance company in the New York market has reached agreement with DFS in compliance with the Department’s final regulation prohibiting insurers from using an individual’s occupational status and/or educational level as unfairly discriminatory factors in setting rates.  DFS announced today that GEICO has articulated to the Superintendent’s satisfaction how it will comply with the regulation, which will eliminate any continuing impact of the company’s prior use of education level attained and/or occupational status and removing such use in underwriting new business.  The company joins Liberty Mutual and Allstate, both of which reached agreement with the Superintendent. Together, the three companies provide coverage to nearly half of the private passenger auto insurance market in New York.

“The use of education and occupation in determining insurance rates unfairly penalizes drivers without college degrees or who work in low-wage jobs or industries without having a rational relationship to driving,” said Superintendent Vullo. “The result is that drivers with higher education and income pay less for auto insurance with no rationale evidence that they are better drivers.  We are pleased that GEICO has recognized its responsibilities to immediately comply with this regulation and we expect any other company that may be utilizing education and occupation in their underwriting to immediately agree to comply before the effective date of the regulation.”

DFS conducted a multi-year investigation that revealed that some, but not all, insurers in New York have used 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 were impacted unfairly because their rates were being skewed from a policy’s inception, regardless of whether the insurer could rationally predict a different risk of loss for that insured.

Under the DFS regulation, which was finalized in December 2017 and made effective this month, private passenger auto insurers are prohibited from using drivers’ occupational status or education level as a factor in initial tier placement unless the insurer demonstrates, to the satisfaction of the Superintendent of Financial Services, that its use of occupational status or educational level attained in initial tier placement or tier movement does not result in rates that are excessive, inadequate, or unfairly discriminatory.

Two auto insurers, Allstate and Liberty Mutual, previously reached agreements with DFS in December 2017, before the effective date of the regulation. A copy of the final regulation can be found here.