By Leslie Scism 

Berkshire Hathaway Inc's Geico unit agreed to halt the use of education and occupation as factors in setting auto-insurance premiums in New York.

New York Financial Services Superintendent Maria T. Vullo's office said that the giant insurer would comply with the state's move late last year to ban what her department has concluded is an unfair practice that can drive up the cost of insurance for people who can least afford it. Geico could have challenged the state's ban in court, but has chosen not to.

Geico joins Allstate Corp. and Liberty Mutual Insurance in overhauling its methodology in the state. Those two other insurers reached agreements late last year with the superintendent. Together, Geico, Allstate and Liberty Mutual provide coverage to nearly half of the private passenger auto-insurance market in New York.

A representative for Geico couldn't immediately be reached for comment.

The use of education and occupation as factors in pricing -- along with credit histories -- has been contentious for years, with insurers using education and occupation alongside many other variables, including age, gender, driving history, vehicle type and estimated miles to be driven, to help set rates.

Many insurers contend that education level and occupation are actuarially justified in predicting the likelihood of an insurance loss. Property Casualty Insurers Association of America has said in recent weeks that New York's regulation "could have the opposite effect of what is intended -- resulting in many consumers paying more for auto insurance," such as police officers and teachers.

The state's ban on the factors applies only to car insurers operating in New York, but regulatory moves in the state are watched throughout the U.S. Some consumer groups representing low-income Americans are hoping it will reopen a national debate on what data should be used in setting rates and what should be prohibited.

Before the 1990s, most car insurers used factors like age, gender, vehicle type, motor-violations history and estimated miles to be driven as major determinants in how much a policyholder pays.

Credit histories then were added by many to the mix. Some insurers have always used occupation, as some car insurers were founded specifically to sell to people in designated professions. Geico, for instance, started in the 1930s as Government Employees Insurance Co. to sell to federal workers and military officers.

Some in the industry say math shows that professionals such as military officers, teachers, engineers, accountants and dentists have lower claims costs and therefore should pay lower rates. Unskilled workers such as day-care employees and stock clerks have a higher risk, according to some actuaries.

New York disagrees.

"The use of education and occupation in determine insurance rates unfairly penalizes drivers without college degrees or who work in low-wage jobs or industries without having a rational relationship to driving," Ms. Vullo said in a statement Monday. "The result is that drivers with higher education and income pay less for auto insurance with no rationale evidence that they are better drivers."

Ms. Vullo also has objected to use of credit histories, but those have been permissible by New York statute since 2004.

Write to Leslie Scism at leslie.scism@wsj.com

 

(END) Dow Jones Newswires

March 12, 2018 19:11 ET (23:11 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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