New car insurer in Pa. denounces 'unfair' practices

The road to auto insurance in Pennsylvania just got more congested - and controversial.

CURE Auto Insurance, a Princeton nonprofit company that has been writing policies just in New Jersey for nearly 19 years, announced yesterday that it was now welcoming customers among Pennsylvania's 8.6 million licensed drivers.

But the company did not stop there. Officials used the opportunity to publicly accuse competitors of discriminatory rating practices - denouncing as "unfair" their use of such factors as a driver's education, occupation and credit score for deciding whether to issue a policy and what premium to charge.

"It started with credit scores for auto insurance, then over the past five to seven years has proliferated into homeownership, high-paying occupation, and now educational attainment," said Eric Poe, CURE's chief operating officer and a bit of an industry outcast on the issue.

Among the companies Poe criticized was Geico. A Geico spokeswoman referred to a report issued in April by New Jersey's Department of Banking and Insurance that found Geico's rating system "consistent with the statutes and rules."

Pennsylvania officials have not faulted other companies, nor have they yet taken a position on CURE's contention that drivers' occupations, education and credit ratings should not be factors insurers can consider in deciding whom to insure and what to charge.

"We're happy to have them," said Randy Rohrbaugh, the state's deputy insurance commissioner, calling CURE's "theme" of discriminatory rating an example of innovation in insurance marketing.

Poe said he hoped CURE's presence in Pennsylvania would trigger legislation banning insurers from considering education, jobs and other nonmotoring factors in determining coverage eligibility and rates.

"We have already met with a key legislator who has already drafted a form of that legislation," Poe said, declining to identify that official.

At CURE, which has 1 percent of the market share in New Jersey with 40,000 vehicles insured, underwriting and rates are based primarily on a person's driving experience and geographic location.

Given that all drivers are required to have insurance and face substantial consequences if caught driving without it, it is not "a socioeconomically fair situation" to force some to pay higher rates because they don't have high-paying jobs or never went to college, said Lena Chang, a mathematician who is president and cofounder of CURE.

But it currently is not illegal in Pennsylvania, Rohrbaugh said.

The state's Unfair Insurance Practices Act prohibits discrimination over certain protected classes in deciding whether to accept or reject someone for coverage, known as underwriting, Rohrbaugh said. Those categories include race, religion, nationality, ethnic group, age, sex, occupation, place of residence or marital status.

"But the law goes on to further say that you can fairly discriminate within those classes for the purpose of rating," he said.

For instance, he said, that is why insurance companies are permitted to charge higher rates for older drivers or the very young.

What the Insurance Department requires before it approves a company's rating plan is actuarial support. There is plenty of it that supports all sorts of rating distinctions that might not seem fair, such as that red cars are more likely to be involved in speeding than blue ones, Rohrbaugh said.

"Whether it's socially unacceptable," Rohrbaugh said, "that's another test."