APCIA urges congress to reject bans on risk-based pricing

Nat Wienecke, senior vice president of federal government relations of the American Property Casualty Insurance Association (APCIA) has urged congress to reject bans on risk-based pricing.

His comments follow the House Financial Services Subcommittee on Housing, Community Development and Insurance Committee hearing on March 4 2020 titled Drivers of Discrimination: An Examination of Unfair Premiums, Practices, and Policies in the Auto Insurance Industry. Legislative proposals listed were HR 1756, the Preventing Credit Score Discrimination in Auto Insurance Act, which would prohibit the use of a credit report, a credit score, or other
consumer credit information in determining auto insurance coverage or rates; and the FAIR Study Act, which would require the director of the Federal Insurance Office (FIO) to annually publish a report that evaluates the presence or absence of disparate impact in auto insurance pricing based on certain categories of individuals.

“APCIA urges the subcommittee to work with the insurance industry to address the underlying issues that can make insurance unaffordable for some drivers, rather than consider legislation that eliminates many risk-based rating factors,” said Wienecke. “That’s why insurers are committed to long-term highway safety and safe infrastructure solutions to prevent crashes. Insurers are working to reduce crash related costs, such as skyrocketing medical costs, frivolous lawsuit abuse, insurance fraud, and escalating auto body and repair costs.

“While this legislation is well intentioned, it would upend risk-based insurance, outlaw factors that actually provide discounts for many policyholders, and create potential availability problems that do not now exist. Legislation to ban rating factors, such as credit-based insurance scores, which have been proven to help insurers more accurately predict the likelihood and severity of future insurance claims, would likely have a negative impact on most consumers.

“Ironically, the very factors often sought to be prohibited by legislation, play a role in affordability because they serve as risk-based discounts for many policyholders. The fairest way to determine what people pay for auto insurance is to use a variety of factors that provide insurers with a more complete picture of a consumer’s potential for filing a claim or having a loss. Personalised risk profiles help consumers and provide the fairest insurance system.

“Preventing insurers from using factors that are predictive of risk of loss would result in less accurate pricing with higher risk drivers paying less and lower risk drivers paying more for insurance. The best way to achieve affordability for consumers is to address the most significant expenses that drive up the cost of insurance. APCIA strongly opposes HR 1756, the Preventing Credit Score Discrimination in Auto Insurance Act and the FAIR Study Act.”