NAMIC Says Auto Insurance Bill Will Hurt Consumers

Targeted News Service (Press Releases)

INDIANAPOLIS, Indiana, June 14 (TNSgov) -- The National Association of Mutual Insurance Companies issued the following news release on June 13, 2023:

Legislation to restrict underwriting by banning the use of non-driving rating factors is misguided and will cause rates to increase for most consumers, the National Association of Mutual Insurance Companies said today.

H.R. 3880, The Prohibit Auto Insurance Discrimination, or PAID, Act, was reintroduced in the House of Representatives on June 6 by Reps. Bonnie Watson Coleman, D-N.J., Rashida Tlaib, D-Mich., and Mark Takano, D-Calif. The legislation would prevent insurers from accurately matching risk to rate through an overly broad elimination of a multitude of proven factors, such as income, credit scores, and education level. This would limit an auto insurance company's ability to accurately determine risk in underwriting policies, which will ultimately lead to less risky drivers subsidizing coverage for those who present a greater risk of loss.

"Non-driving factors are approved by state regulators for a very simple reason - they have been actuarially proven to correlate with the risk a potential policyholder presents," said Jimi Grande, senior vice president of federal and political affairs for NAMIC. "When those factors are taken away, rating becomes less accurate, and safer drivers end up subsidizing coverage for riskier drivers."

Multiple federal and state governmental agencies, including the Federal Trade Commission, have studied the issue, concluding the use of non-driving factors, and credit-based insurance scores in particular, help insurers better assess risk and offer rates that are actuarially sound, while affording equal treatment to consumers. Further, nearly every state has enacted laws governing how insurers can use credit-based insurance scores and require notice to consumers on initial use and if an adverse action is taken.

"Insurance is a highly competitive industry, and risk-based pricing is what enables insurers to offer competitive rates and levels of coverage while remaining financially stable," Grande said. "Every state and territory have laws and regulations governing the use of non-driving factors, but the PAID Act would instead force insurers to assume that all drivers represent the same level of risk, making riskier drivers harder to identify and increasing rates for everyone."