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Consumer groups ask California to ban education and occupation insurance discounts
By Insure.com staff

Fourteen consumer and low-income citizen advocacy groups are petitioning California Insurance Commissioner Dave Jones to prohibit auto insurance companies from giving discounts based on customers' occupation and education levels.

Insurers market discounts to a variety of so-called "affinity groups," including alumni associations, teachers, firefighters, lawyers, doctors and homeowners. Led by Consumer Watchdog, the petitioners assert that the use of affinity groups for pricing insurance violates California's Proposition 103, which was approved by voters in 1988 and established a system for regulating auto, homeowners and business insurance rates.

Many of the affinity groups that qualify customers for discounts are "thinly veiled surrogates for wealth, ethnicity and race," the petition states. The letter to Commissioner Jones cites a recent national study by the Consumer Federation of America that found that some insurers charge higher rates to drivers with less education and lower-status jobs and are discriminating on the basis of income and race, including in California. The federation is among the groups joining Consumer Watchdog in the petition.

The California Department of Insurance said in a written statement that it would consider the petition. But the department noted that an administrative law judge's recent decision to uphold Allstate's right to have separate rates for affinity groups was consistent with rate approvals for other California insurers, which have used affinity groups in pricing auto insurance for years.

"In several of those prior rate applications, Consumer Watchdog agreed to settlements including affinity groups," the department said. "Contrary to Consumer Watchdog's assertion, no group subsidizes any other groups."

The Association of California Insurance Companies called the petition "misguided."

"The loss experience of certain affinity groups is better than for other policyholders and its only fair that members of those groups should benefit from that with lower premiums. In addition, offering coverage to a specific group like members of the military, firefighters, police or teachers saves marketing costs and those reduced costs are passed along to the consumer," association President Mark Sektnan said in a written statement. "Insurers in California follow Proposition 103 and all the laws and regulations. Keep in mind that the California Department of Insurance must approve all rating plans before they can be implemented in the market. And, in fact, the California Department of Insurance's own filing instructions specifically allow for such use."

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