DFS Announces New Agreement with Fourth Major Insurer to Protect New York Drivers from Unfairly Discriminatory Auto Insurance Rates

DFS Announces New Agreement with Fourth Major Insurer to Protect New York Drivers from Unfairly Discriminatory Auto Insurance Rates

Progressive Agrees to Remove the Use of Occupational Status and Education as Factors in Setting Auto Insurance Premiums as Required by DFS Final Regulation

With Four Major Auto Insurers Having Reached Agreement, 96% of New York’s Auto Insurance Market Will be in Compliance by the Regulation’s Effective Date

Financial Services Superintendent Maria T. Vullo today announced that a fourth major auto insurance company in the New York market has reached agreement with DFS regarding the approach to compliance with DFS’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 Progressive has articulated to the Superintendent’s satisfaction how it will comply with the regulation, which involves eliminating 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 GEICO, Liberty Mutual and Allstate, which reached earlier agreements with the Superintendent.  Together, the four companies provide coverage to the majority of the private passenger auto insurance market in New York.

“We are pleased that Progressive has recognized its responsibilities with regard to this regulation and agreed to cease the use of education and occupation in determining insurance rates, which can unfairly penalize drivers without college degrees or who work in low-wage jobs or industries,” said Superintendent Vullo. “The DFS regulation ensures that New Yorkers are not unfairly discriminated against and charged higher rates due to factors outside their control or unrelated to driving ability.”

During a multi-year investigation, DFS found that some, but not all, insurers in New York had 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 had their rates skewed from inception, regardless of whether the insurer could rationally predict a different risk of loss for that insured.

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

Allstate and Liberty Mutual reached agreements with DFS in December 2017, before the effective date of the regulation; GEICO reached agreement with DFS earlier this month.

A copy of the regulation can be found here.

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