The Delaware Insurance Department has issued a report critical of the use of gender in auto insurance rating and concluding that the state should end the practice as six other states have done.
The report found that several of the state’s largest auto insurers charge female drivers 8-9% more than male drivers, when all other factors including vehicle and drivers’ history are equivalent. It says females insured by GEICO and Progressive face the highest cost differentials and the cost disparity can rise to as much as 20% under some plans.
State Farm and California Casualty charge women and men the same premium, while Donegal charges a higher premium to men, according to the study.
Navarro is advocating for Senate Bill 231 under which gender would be prohibited as a rating factor. California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania currently ban gender as a rating variable. According to Navarro, prohibiting the use of gender in Delaware would only require insurers implement consumer protections that are already in force in these other states where a number of the insurers already do business.
The Delaware/CFA report uses insurance industry pricing data analyzed by the Consumer Federation of America (CFA). The data is from Quadrant Information Services and reflect the August 2020 cost of a policy covering only the state’s mandatory minimum coverage for 35-year-old male or female customers who have clean driving records and are otherwise the same in every respect: unmarried, holding a high school diploma, renting their home, and driving a 2011 Honda Civic LX on a 12-mile commute five days a week, 12,000 mile annually.
Insurers have criticized the report’s methodology and its conclusions.
“The report’s reliance on website quotes gathered by an outside vendor is potentially unreliable and may well be an inaccurate representation of what a consumer actually pays, which is often very different from website quotes. Website quotes are the beginning of obtaining the actual premium, not the end,” said the American Property Casualty Insurance Association (APCIA) in a statement.
APCIA argues that each insurer has its own factors that it uses in rating and all rating plans are subject to regulatory review to ensure factors being used comply with all laws, including state anti-discrimination laws. “Having the option for different rating factors and having more choices rather than fewer leads to the best result for all consumers,” the insurer group said, noting that 43 states and the District of Columbia permit auto insurers to use gender as a rating factor.
The Delaware/CFA report claims that gender is not a reliable factor in risk-based pricing because insurers do not agree on gender-based risk of loss. For example, based on GEICO’s online pricing tool, the study found that a 20-year-old female driver was quoted a higher rate than a 20-year-old male driver, a class often thought to be the riskiest drivers. According to the report, this illustrates a lack of consistency in pricing of young men also.
“Rating factors should be meaningfully related to drivers’ risk of loss and should not be disproportionately harmful to customers based on protected classes. Though used by many insurers, gender does not meet these critical tests. With several companies setting prices that suggest women are inherently riskier, another company rating as though men are riskier drivers, and two companies considering it unnecessary to consider the gender of the driver, it is clear that this factor does not meaningfully or accurately capture a driver’s risk of loss. The inconsistency of gender’s usage reveals that carriers’ claims of correlation to risk are deeply flawed,” the report states.
Sen. Kyle Evans Gay is the prime sponsor of the legislation that will be filed this week. “Most Delawareans would be surprised to learn that gender factors have any bearing on premium pricing, which should be based in data and accident records,” said Gay.
House Majority Leader Valerie Longhurst supports the change. “This legislation is a no-brainer, and I urge my colleagues in the General Assembly to support it,” Longhurst said.
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