Bill would eliminate education as factor in insurance rates

Insurers take education and occupation into account for premiums, and that has Rep. DeLuca fuming

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HARRISBURG -- Fifteen years could save you 35 percent or more on your car insurance.

That is if you spend those years in a classroom and buy your policy in Pennsylvania, where insurers take education and occupation into account when calculating rates.

State Rep. Anthony DeLuca, D-Penn Hills, wants to change that with legislation he plans to introduce next month.

"It's discriminatory. Unfortunately, everybody's not born with the same things. Some families can't afford to send their kids for higher education," said Mr. DeLuca, chairman of the House Insurance Committee. "That doesn't mean they couldn't make it in higher ed; they just can't afford it. Why should they be discriminated against and penalized on their insurance rate because their family couldn't afford college?"

Insurance executives, though, say their actuarial research has shown that people in certain job categories and those with graduate degrees are less likely to file expensive claims.

"We've been able to differentiate more clearly and that has led to a more competitive industry and the significant lowering of prices for better risks," said insurance industry consultant Frank Cacchione of Pocono Lake.

Under one carrier's rates, a 37-year-old Pennsylvanian with a clean driving record and a Ph.D. would pay $546 a year to insure a 10-year-old sedan. If he were a high-school dropout instead of a doctor of philosophy, the rate would be $870.

Mr. DeLuca said that's not fair.

The insurance industry disagrees.

"If I asked you to pay $100 or more every year so someone in a job like bartending [which is not considered a good insurance risk] could have more affordable insurance, some would agree to that and some would say it's socialism," Mr. Cacchione said. "From my point of view, when the government says you've got to raise somebody's price so another person with a different set of characteristics pays less, then that's a problem."

Eric Poe doesn't think so. He is chief operating officer of CURE Auto Insurance, a New Jersey company that also does business in Pennsylvania. Unlike most competitors, Mr. Poe's company doesn't use education or occupation to establish insurance rates.

"Your rates can't go up because you don't have a high school diploma, and they can't go down because you have a master's. It's a more fair rating system. If you're a good driver, I don't care if you're a doctor or a janitor, we're going to give you the fairest rate," he said.

That's good news to Anthony Fedele, 37, of Philadelphia, who had been paying $2,104 a year to insure his Ford Lightning muscle truck through a carrier that penalized him for not finishing college. Now he pays $1,120 a year for the same coverage from CURE, which didn't ask about his education.

"I don't think one thing has to do with the other. It's irrelevant," he said. "It should be real simple: If you have a good driving record, your insurance should be cheaper. If you don't drive so good, it should be more expensive."

The Insurance Federation of Pennsylvania says the current regulations work and there's nothing in them to prohibit companies like CURE from disregarding education and occupation when calculating rates.

"But prohibiting all insurers from considering these factors in auto rates, even though they are proven to be actuarially accurate, doesn't make sense for consumers," said Sam Marshall, president of the federation.

He and other opponents of Mr. DeLuca's proposed change say education and occupation have been good predictors of safe driving.

"Sure, there are professional people who have accidents, but many of the professional designations will be good [insurance] risks," Mr. Cacchione said.

Years ago when he worked for Colonial Penn in Philadelphia, one of his accounts was The Walt Disney Co.

"In the Imagineering group -- the group of creative engineers who design attractions -- were unbelievably good risks," Mr. Cacchione said. "Then we insured the cast members at Disney World and Disneyland and it was chaos. You observe a difference and you have to say, 'What am I going to do about that?' If I charge the Imagineering people a high price, they'll just buy from somebody else, but for the cast members you have to charge more because of what you see."

Mr. Poe said he's been getting flak from insurance trade associations for speaking against the practice of using education and occupation to set rates.

"They said, 'Eric, you're talking about ethics and we're talking about business.' That's the attitude of the industry," he said. "I'm speaking out against it because it's wrong."


Tracie Mauriello can be reached at tmauriello@post-gazette.com or 1-717-787-2141.


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