December 2 – Oregon allows insurers to use credit history, gender, marital status, education, occupation, employment status and more to determine how much to charge for insurance automobile.
Are these things directly related to how well you drive? No.
Do they help insurers assess the risk a driver may present? Insurers believe it.
Two bills earlier this year proposed denying insurers the ability to use these factors to set premiums. Instead, insurers should focus on driving record, kilometers driven and years of driving experience. Apparently, the idea is going to be revived in a bill for the short session of 2022.
Is this the right thing to do? It’s not simple.
Govt. Kate brown and that of Oregon Department of Consumer and Business Services supported these bills. Much of the department’s argument revolved around credit scores. A low credit score can mean that a person pays more for insurance, even if their driving record is clean. There are also concerns that the use of credit scores could be discriminatory. Black and Latino drivers are more likely than others to have lower credit scores. Similar arguments on discrimination have also been made to allow insurers to use education, employment status and profession.
The ministry also took issue with the assumption that gender should be taken into account. For example, the National Road Safety Administration said men and women are equally likely to be distracted drivers. As for marital status, a person is not necessarily a poorer driver because their spouse is deceased or divorced.
What would such changes mean for the insurance industry? Other states, like California, have restricted the information insurers can use. The ministry argued that the insurance industry is still strong.
There are other things to consider, however. This would mean that the premiums would increase for many Oregonians. The ministry says people with good or excellent credit would face increases and people with bad credit would pay less. “The reduction in costs for people with low scores is four times the increase in premiums for people with good or excellent scores,” according to a chart provided by the ministry.
Some people in Oregon also benefit from reductions due to their membership in a trade union or other groups. These would be eliminated. This is part of the reason why the Oregon Police and Sheriff Coalition opposed such changes.
Laurent Powell, insurance analyst at University of Alabama, insisted in his testimony before the Legislature that the predictors used by the insurance industry are accurate and help match premiums to risk. They are not perfect. They help. Profession and education can help reveal things that are difficult to observe, such as risk tolerance. Gender and marital status can also be correlated with kilometers driven, and when and where people drive. He also said that while Oregonians bought their insurance in California, which has many of the policies in the bills, they would have paid more than about 7%.
It is not easy to know who will be a safe driver. If the state of Oregon dictate how insurance companies can rate drivers? Tell lawmakers what you think. You can find them here: oregonlegislature.gov/FindYourLegislator/leg-districts.html.
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