A group of consumer advocates in Maryland is urging lawmakers to prohibit insurers from using criteria such as gender and marital status when setting car insurance rates. (Manuel Balce Ceneta/AP)

A Maryland consumer rights group is urging the state to prohibit car insurers from using criteria such as gender, marital status and education levels when setting premiums. 

The Maryland Consumer Rights Coalition argues that using criteria that have nothing to do with a person’s driving record has unfairly jacked up the cost of state-mandated car insurance for some motorists, particularly women and low-income drivers. 

“It’s tantamount to economic profiling,” said Marceline White, the organization’s executive director.   

But the insurance industry argues that using these and other ostensibly extraneous data, such as credit scores, has allowed insurers to calculate and price risk with more precision. Better risk-pricing has enabled insurers to serve a bigger market, including drivers who might not be able to obtain any insurance except through state-run, high-risk insurance pools. 

“It’s good for everybody,” said Eric M. Goldberg, vice president for state affairs at the American Insurance Association’s Mid-Atlantic region. “It’s good for all drivers when insurers are able to use factors that enable them to price more accurately.”  

The issue of fairness in car insurance rates has received more attention as premiums rise and insurers tap into a deepening pool of consumer data to predict whether someone will crash or submit an insurance claim. One British insurer considered using Facebook postings to help calculate car insurance rates until Facebook shut the effort down, the BBC reported.

Meanwhile, car insurance rates in the United States have become one of the leading causes behind a recent jump in consumer prices. The cost of auto insurance rose 1.3 percent in January, compared with a year ago, making for the biggest increase since 2001, the Associated Press reports.

Consumer advocates in the United States, including the Consumers Union and Consumer Federation of America, say insurers have been making unrestricted use of Big Data in ways that harm consumers. In 2016, lawmakers in 15 states and the District of Columbia considered whether insurers should be permitted to use credit scores in setting car insurance rates, according to the National Conference of State Legislatures 

The Maryland Consumer Rights Coalition says insurers’ use of marital status and gender cost single women hundreds of dollars more in coverage — an estimated 24 percent more on average. It also documented the “widow’s penalty” that, at one company, pushed the cost of insurance 32 percent higher for widowed women, compared with a 6 percent decline for widowers.  

“Maryland’s rates are pretty high compared to other parts of the country, and we use a lot of these factors that other states have been moving to get rid of,” White said.

Last year, the Maryland consumers group backed legislation that would have outlawed a host of nondriving factors. The group prevailed in eliminating the widow’s penalty but failed to persuade lawmakers to prohibit the use of credit scores and other criteria. This year, the group is urging passage of measures that would prohibit insurers from considering gender, marital status, occupation or education when setting rates. 

Insurance companies have been opposed, and White said she expects a fight.  

“They have a very strong lobby,” White said. “In part, because of that, our rates are pretty high.” 

But Goldberg said that if anything, the use of those nondriving factors has kept prices down. The car insurance business is highly competitive, with approximately 160 companies writing policies in Maryland. To remain competitive, companies have had to identify pricing factors with a proven link to a motorist’s driving behavior and insurance risk,  Goldberg said.  

“And that’s what we’re interested in: How risky is the policyholder, and can we assign a price to them that makes it worthwhile to insure them?” Goldberg said in an interview.  

In testimony before a Maryland House of Delegates committee this month, James Lynch, who is the chief actuary for the Insurance Information Institute, said studies have demonstrated a connection between factors such as a driver’s education and occupation and his crash risk.  

Lynch, citing a 2015 study in the American Journal of Epidemiology, said a person lacking a high school diploma has a fatal crash risk more than seven times higher than a college graduate. He also testified that a New Zealand study showed a correlation between type of occupation and driver injuries, and he cited a 2006 analysis by the Maryland Insurance Administration, which regulates the industry, that found occupation and educational attainment were “reliable predictors of loss.”  

Goldberg said insurers need to charge more to people who are likely to file more claims — and consumer advocates are telling them they shouldn’t. 

“Are consumer groups suggesting that we should charge more of customers that aren’t going to file claims? That seems a little backwards, doesn’t it?”

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