Bill against auto insurance 'bias' gets major backing

Insurance industry, on the other hand, expresses strong opposition

Bill against auto insurance 'bias' gets major backing

Motor & Fleet

By Terry Gangcuangco

Illinois House Bill 4611 – which seeks to prohibit auto insurers from unfairly discriminating based on age, race, color, national or ethnic origin, immigration or citizenship status, sex, sexual orientation, disability, gender identity, or gender expression – has secured the backing of Illinois Secretary of State Alexi Giannoulias.

The Illinois Secretary of State expressed his support during a committee hearing on Monday, saying an insured’s driving record should be the basis of auto insurance rates and not the abovementioned factors.

“The purpose of auto insurance is to protect motorists while they drive; therefore, an individual’s driving record should serve as the primary factor that’s analyzed when setting rates,” Giannoulias said.

“Illinois insurers on average currently charge consumers with a safe driving record and poor credit hundreds of dollars more than someone with a DWI (driving while intoxicated) conviction and excellent credit.

“This emphasis on socio-economic factors is transparently unfair and discriminatory, leading to less availability, less affordability, and less attainability, especially those from disadvantaged neighborhoods and communities of color.”

The proposed legislation also wants to stop the use of external consumer data and information sources in a way that unfairly discriminates policyholders.

State Representative Thaddeus Jones, one of the sponsors of the bill, called the other factors “completely irrelevant,” saying they should never be a barrier to one’s ability to drive and be insured.

Similarly, co-sponsor State Senator Napoleon Harris, III, said: “There is no place for discrimination in our state or in our country, particularly the insurance industry, which so many Illinoisans rely on to transport their families and drive to work every day. “All motorists should have the opportunity to attain affordable insurance.”

If enacted, the Illinois Insurance Code amendment will allow the Department of Insurance to examine insurers’ use of external consumer data and information sources, algorithms, or predictive models in any motor vehicle liability insurance practice.

Aside from HB 4611, the Illinois House Insurance Committee also heard HB 4767, which sets forth factors that are prohibited with respect to underwriting and rating a policy.

Industry opposition

The insurance industry in Illinois, however, does not support the two bills.

In an emailed statement, the American Property Casualty Insurance Association, the Illinois Insurance Association, and the National Association of Mutual Insurance Companies jointly declared: “The Illinois insurance industry expressed its strong opposition to both HB 4611 and 4767. These bills, while intended to address rising insurance costs, would have the opposite impact and likely harm consumers by reducing competition, and increasing costs for Illinois drivers.

“Insurance rates are first and foremost a function of claims and their costs. Rather than working to help make roadways safer and reduce costs, these bills seek to change the state’s insurance rating law and prohibit the use of factors that are highly predictive of the risk of a future loss.

“Prohibiting highly accurate rating factors, as HB 4767 does, disconnects price from the risk of future loss, which necessarily means high-risk drivers will pay less and lower-risk drivers will pay more than they otherwise would pay. Additionally, changing the rating law and factors used will not change the economics or crash statistics that are the primary drivers of the cost of insurance in the state.

“In fact, increasing regulations would undermine the state’s consumer-focused insurance marketplace, which has benefited consumers and for many decades helped to keep costs below the national average for consumers.

“To ensure fairness in insurance pricing, every consumer should pay a rate that accurately reflects the cost of providing insurance to that customer and similarly situated consumers. Insurance pricing is fair when the rate paid accurately reflects the likelihood that future losses will occur and the likely cost of those losses.”

The trade bodies asserted that lower-risk customers are not overcharged for insurance when rates are set based on objective data and risk factors that accurately predict loss.

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