GEICO is not the only insurer to use education and occupation, but it is the largest with nine million customers. Allstate (Stock Quote: ALL), the nation’s second largest insurer, uses education and occupation to determine rates in four states.
Officials of another major insurer, Liberty Mutual (Stock Quote: SAF), testified at a Florida hearing in 2007 that unemployed persons applying for insurance may end up in its higher priced Liberty Insurance unit solely because they do not have a job. Liberty officials said they consider education and joblessness in determining rates, but not occupation. Another insurer that considers education levels is 21st Century insurance.
Hageli said he wouldn’t be surprised if more insurers adopt similar rating factors in the future because it gives them additional ways to calculate a premium.
Poe of NJ Cure says that potential trend concerns him: “We don’t want to compete on those grounds, but if the practice is not banned, GEICO will have an unfair advantage."
Poe says GEICO and other insurers use education and occupation to offer their best rates to more affluent. Those customers are more profitable because they can afford to buy larger limits of coverage and can be cross-sold other lines of insurance, he said.
Tom Zutell, a spokesman for Florida Insurance Commissioner Kevin McCarty, says the Commissioner is particularly concerned that people who lost their jobs because of corporate downsizing will end up paying higher rates.
Insurance experts say luckily for consumers there are still many insurers who don’t use education and occupation for rate setting. But opponents of the practice have been fighting a losing battle. Legislation to stop it has been beaten back in both New Jersey and Florida at the insurance industry’s urging.
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