Current through Register Vol. 46, No. 39, September 25, 2024
(a)
Background.
(1) Insurance Law section 2301
provides that the purpose of Insurance Law Article 23, in relevant part, is to
"promote the public welfare by regulating insurance rates to the end that rates
shall not be excessive, inadequate, unfairly discriminatory ... ." As a
corollary, Insurance Law section 2303 requires, in relevant part, that rates
not be excessive, inadequate, or unfairly discriminatory. In applying this
rule, accepted actuarial standards and New York law require that a reasonable
relationship exist between the characteristics of a class and the hazard
insured against, and that the insurer bear the burden of establishing whether
the se requirements have been met.
(2) Pursuant to Insurance Law section 308,
the superintendent initiated an investigation of the use of an insured's
education level attained and/or occupational status within the voluntary market
by certain private passenger motor vehicle insurers in their underwriting rules
governing initial tier placement. During this investigation, the superintendent
learned that some, but not all, insurers in the state use an individual's
education level attained and/or occupational status in establishing initial
tier placement. The insurers' consideration of these factors has resulted in
cases where classes of insureds have been placed in less favorably rated tiers,
which may lead to higher premiums, without adequate substantiation that an
individual's level of education attained and/or occupational status relates to
his or her driving ability or habits such th at the insurer would suffer a
greater risk of loss. The insurers failed to provide sufficient support for the
existence of the necessary relationship for the use of occupational status or
any convincing evidence to support the necessary relationship for the use of an
insured's level of education attained, whether alone or in combination with
occupational status. As a result, the insurers failed to establish that their
use of education and/or occupation in establishing initial tier placement was
not unfairly discriminatory.
(3) To
ensure that use of education level attained and/or occupational status in
initial tier placement, tier movement, or the establishment of the rates shall
not result in a rate that violates Article 23, the use of such variables by an
insurer shall comply with the rules in this section or shall not be used to
determine initial tier placement, tier movement, or premium rate for private
passenger automobile insurance in the voluntary market in the State.
(b) Use of Education Level
Attained in Multi-Tier Programs. As a result of the superintendent's
determination following investigation that certain insurers' use of education
level attained in initial tier placement results in unfairly discriminatory
rates, an insurer shall not use an individual's education level attained as a
factor in either initial tier placement, tier movement, or the establishment of
the rates at all, unless th e insurer demonstrates to the satisfaction of the
superintendent that its use of education level attained in initial tier
placement or tier movement shall not result in a rate that violates Insurance
Law Article 23.
(c) Use of
Occupational Status in Multi-Tier Programs.
(1) Except as provided in paragraph (2) of
this subdivision, an insurer shall not use occupational status as a factor in
either initial tier placement, tier movement, or the establishment of the rates
unless the insurer demonstrates to the satisfaction of the superintendent that
its use of occupational status in initial tier placement or tier movement shall
not result in a rate that violates Insurance Law Article 23.
(2) An insurer may use occupational status
as a factor in initial tier placement and tier movement provided that the
insurer demonstrates to the satisfaction of the superintendent that its use of
the factor shall not result in a rate that violates Insurance Law Article 23
and that each of the following conditions is satisfied:
(i) the insurer demonstrates to the
satisfaction of the superintendent that each particular occupation grouping has
a reasonable relationship to an insured's driving ability or habits such that
an in surer would predictably suffer a greater or lesser risk of
loss;
(ii) an insured's income
shall not be a risk characteristic, whether directly or indirectly;
(iii) an unemployed person who was previously
employed, including a retired person, shall remain in the group designated for
his or her previous occupation regardless of the amount of time since such
person was last employed;
(iv) the
insurer shall establish a group separate from its other occupational groups
that contains homemakers and those insureds who have never been employed, which
group shall be a neutral factor for impacting rates;
(v) where the insured's initial tier
placement is influenced by occupational status, the insurer shall provide tier
movement rules that address a change in the insured's occupational status at
the time of renewal providing the insured with the opportunity to reduce his or
her premium;
(vi) any rate
differential permitted under this paragraph s hall be commensurate with the
related reduction of loss costs and associated premiums; and
(vii) where insufficient data exists with
respect to a particular occupation and the insurer wishes to align that
occupation in a group with a similar one, the insurer shall have a sufficiently
reasonable explanation for placing the two occupations in the same group.
(d)
Notwithstanding section
154.2 of this Part, an insurer
shall not use education level attained and/or occupational status as a factor
in initial tier placement unless the insurer files with the superintendent its
underwriting rules governing tier placement and the superintendent approves the
rules in accordance with Insurance Law Article 23 as part of the insurer's
multi-tier program. An insurer that, as of the effective date of this paragraph
had utilized education level attained and/or occupational status in its initial
tier placement, shall amend its multi-tier rating program and tier movement
rules to the satisfaction of the superintendent within 90 days after the
effective date of this section to comply with this section for policies issued
on or after such date and, for policy renewal s, to remedy any continuing
impact of the insurer's prior use of education level attained and/or
occupational status in initial tier placement on an insured's premium
rate.
(e) Every insurer that uses
education level attained and/or occupational status in accordance with this
section as a factor in its multi-tier program shall provide a written notice
acceptable to the superintendent at least annually to the first-named insured
that conspicuously explains how an insured may notify the insurer or its agent
of any update in th e insured's education level attained and/or occupational
status that would result in a reduction of premium.
