With auto insurance premiums set to rise on January 1 for more than a million drivers across the state, several lawmakers and advocates have called on legislative leaders to move a stalled bill that would ban insurers from using factors such as education , employment and credit scores to set rates.
This is a widespread practice in New Jersey that results in higher premiums for those least likely to afford them: poor and minority drivers, critics say.
Insurance rates should be based solely on driving records, said Congresswoman Annette Quijano, a primary sponsor of the bill.
“Unfortunately, some auto insurance companies use education, employment, employment status, home ownership status, marital status and credit scores as factors in underwriting auto insurance,” Quijano said in a statement. a press conference Monday morning at the Statehouse. “These factors have nothing to do with a person’s driving record and only serve to create a two-tier system that punishes New Jersey’s poor and working class.”
The call to action came less than a month before a new law went into effect raising mandatory minimums for liability insurance, a controversial measure meant to bolster protections for crash victims that critics warn instead, it will make insurance unaffordable for low-income drivers. Rates for about 1.1 million drivers in the lowest coverage levels are expected to rise by about $125 under the new law.
Basic liability insurance is already out of reach for many drivers, said Chuck Bell, a Consumer Reports advocate. He pointed to a 2017 study by the Federal Insurance Office, which found that 2.3 million people in New Jersey live in zip codes where they cannot afford basic liability coverage.
Penalizing drivers for things like bad credit scores makes insurance even more unaffordable, advocates agreed. That’s especially unfair when things people have little control over — like medical debt, child poverty, or job loss because an employer moves — can hurt their credit history, they said.
“Employing factors that are not remotely related to driver road safety not only raises fares and decreases affordability for many residents across the state, but is also unequivocally linked to structural racism,” said Nicole Rodriguez, chair of the progressive New Jersey think tank Political Perspective.
Drivers with poor credit history can pay nearly three times as much in premiums as those with excellent credit, Bell said.
“These are basically more gut punches for the consumer,” Bell said.
Bell has criticized the state Department of Banking and Insurance, saying it fails to exercise its authority to ensure fair and non-discriminatory rates. The department did not respond to a letter demanding regulatory action that supporters sent in April, Bell said. A spokeswoman for the department did not respond to a request for comment.
Under the House version of the bill, insurers would be barred from considering education, occupation and credit score in determining auto insurance premiums. The Senate version adds homeownership status and marital status to that list of prohibited considerations.
Introduced in January, the bill has not been moved to any of the chambers. Lawmakers tried to get it passed in the last legislative session as well, but while the Senate passed it, the bill failed to move in the House.
Assemblyman Lou Greenwald (D-Camden), House Majority Leader, told the New Jersey Monitor Monday that he wants to see actuarial data cited by supporters of the bill, as well as an analysis of how the bill would impact consumer costs and the impact of such legislation in other states.
“I would say it’s not okay to use any factor to set someone’s rates in a way that discriminates against any group,” he said.
But he said he fears removing factors like employment could raise rates for people like seniors and teachers, who can’t afford such hikes.
Greenwald led efforts a decade ago to reform auto insurance regulations in New Jersey, which he said made auto insurance more affordable and reduced the number of uninsured drivers on Garden State roads.
“The question is, are people being denied access to insurance for this reason? And if you have the lowest uninsured rates in the country, that seems to indicate the answer is no,” Greenwald said. Only 3.1 percent of drivers are uninsured in New Jersey, the lowest rate nationwide, according to the Insurance Information Institute.
Maura Collinsgru, director of policy and advocacy at New Jersey Citizen Action, said it’s not a login issue.
“We’re not saying people can’t get insurance. We’re saying they’re overpaying,” he said.
Five states — California, Hawaii, Massachusetts, Nevada and Washington — ban insurers from using credit information to set auto insurance rates, according to Citizen Action. Seven states — California, Georgia, Hawaii, Massachusetts, Michigan, New York and Vermont — prohibit insurers from considering education and occupation when determining premiums.
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