Pa. Eyes Bill To Ban Ed, Occupation Factors In Auto Rating

Industry officials cautioned against a Pennsylvania legislator’s plan to introduce a bill in January that would ban the use of education and occupation as auto insurance rating factors in the state.

A recent news report in the Pittsburgh Post-Gazette noted that State Rep. Anthony DeLuca, D-Penn Hills—who chairs the Pennsylvania House Insurance Committee—plans to introduce the bill because he believes using education and occupation as auto rating factors is discriminatory.

Loretta Worters, spokesperson for the Insurance Information Institute (I.I.I.), did not comment on the bill proposal specifically but said restrictions in actuarially valid underwriting criteria would lead to uncertainty, higher prices and less competition.

“Despite what Rep. DeLuca claims, all underwriting factors used by auto insurers, including occupation and education, have been actuarially demonstrated to enhance the insurer's ability to predict loss,” she said via e-mail.

She also pointed out that a June 2006 Maryland Insurance Administration study concluded that occupation and education, when used as rating factors for auto insurance, are actuarially predictive of loss and are not unfairly discriminatory.

Dave Snyder, vice president and assistant general counsel of the American Insurance Association (AIA), pointed to a formal administrative law proceeding that occurred in New Jersey, which also found that using education and occupation as rating factors is not discriminatory.

Mr. Snyder said AIA does not necessarily endorse using education, occupation, or any other specific rating factors, but he said banning a practice that is legal and effective is not good for consumers and could lead to better risks subsidizing bad risks.

He added that while AIA does not agree with the legislation itself, concerns raised by Rep. DeLuca deserve to be considered.

Mr. Snyder said that while some insurers are using education and occupation as rating factors, others are moving in the opposite direction, by basing rates more on vehicle usage and miles driven. The variation in rating factors, he added, is what is to be expected from a very competitive marketplace.

The proper approach, he stated, is to allow for innovation in the marketplace, as long as the new approaches comply with applicable laws—including anti-discrimination laws.

Ms. Worters noted that “most auto insurers base price on multiple factors, including the type of vehicle a policyholder owns, how many miles they drive, a person’s driving record and the community in which a policyholder resides.”

She added, however, that occupation and education are also important predictors of loss. “No single factor determines eligibility for coverage or the premium charged. In fact, insurers use 20 or more risk factors when making determinations about price,” she said.

WSI Predicts Three Major Hurricanes For 2009

WSI Corporation is forecasting three Category 3 or higher hurricanes, and seven hurricanes in total for the 2009 Atlantic tropical season.

Andover, Mass.-based WSI—a provider of weather-driven business solutions for media markets, federal and state government agencies, and the energy and aviation industries—said it expects 13 named storms for the 2009 hurricane season, higher than the 1950-2008 average of 9.8 named storms.

WSI said warmer sea surface temperatures and favorable or neutral wind shear, due to the lack of an El Nino event, will be the primary reasons for the increased activity.

Todd Crawford, WSI seasonal forecaster, said in a statement: “Since 1995, most tropical seasons have been more active than the long-term averages, due to warmer Atlantic Ocean temperatures. We do not see any reason why this active regime will not continue in 2009. It should be noted that the Atlantic temperatures are cooler than last year, however, and we currently do not expect 2009 to be quite as active as 2008.”

WSI also noted it will update its forecast in April 2009.

Allstate IDs 10 Deadliest Cities For New Year’s Teen Drivers

Jacksonville, Fla., led the list of 10 cities that Allstate calls the deadliest hotspots for teen drivers on New Year’s Eve and New Year’s Day.

The survey, part of the Northbrook, Ill., insurer’s “Home for the Holidays public awareness and policy campaign,” listed 10 cities it calls the deadliest hotspots for teens during the two-day period among the nation’s 50 largest metro areas.

Allstate said that what each of these areas has in common is that over the past eight years they have had the highest fatal crash rates for teen drivers during the New Year’s holiday period.

The number does not reflect the number of teens killed, but the number of crashes involving a teenage driver and a fatality.

Among the nation’s 50 largest metropolitan areas (a central city and its surrounding counties), Allstate identified the deadliest hotspots:

• Jacksonville, Fla.
• Columbus, Ohio
• Richmond, Va.
• Birmingham, Ala.
• Orlando, Fla.
• Phoenix
• Las Vegas
• Philadelphia
• Sacramento, Calif.
• St. Louis

The ranking is based on Allstate’s teen driving score assessment.

According to the Insurance Institute for Highway Safety, from 1991 through 2006, more than 5,000 teens died on America’s roads each year. The year 2007 was the first in which the teen figures dropped below 5,000 since 1975. Motor vehicle accidents also were identified as the leading killer of American teens in 2005, the latest year for such data, the IIHS said.

The study examined recent federal crash statistics, Allstate’s claims data on teen collisions and U.S. Census Bureau statistics to score metro areas across the nation on rates of fatal crashes involving teen drivers during the holidays.

It was conducted by Allstate in conjunction with Sperling’s BestPlaces, a Portland, Ore., research firm specializing in demographic studies and analysis.

Agents, Inform Homeowners Of Holiday Liabilities

Many homeowners are unaware of the liability they expose themselves to if they host holiday parties and allow individuals to drive home drunk, according to a new national survey released by Trusted Choice and the Independent Insurance Agents & Brokers of America.

The survey asked homeowners if they believed they were legally liable if a guest caused an alcohol-related traffic accident after leaving a holiday party at their home.

The survey of 809 homeowners found that one-third did not think or did not know if they could be held responsible in the event of an alcohol-related accident. The telephone survey was conducted in November and has a margin of error of 3.5 percent.

Trusted Choice, the independent agent branding campaign of the Alexandria, Va.-based independent insurance agent group, said agents should advise their homeowner clients that in many states, individuals hosting holiday parties can be held liable.

“There are so many ‘what if’ scenarios that can face insurance buyers today, and not all of them are everyday occurrences,” said Madelyn Flannagan, IIABA vice president for education and research commented in an e-mail. “An independent agent can provide a tremendous value-added service to their clients by providing expert knowledge and coverage reassurance. The nation’s current economic crisis has everyone more vigilant about their financial matters. Agent’s need to reach out and help clients understand and mitigate their potential losses, not only during the holiday season, but during the entire year.”

Trusted Choice went on to say that many courts have found hosts liable for the damages their party guests cause as a result of consuming alcohol at their social gatherings and then driving motor vehicles.

Many states also have enacted statutes that can be interpreted as mandating non-commercial social host liability. In these situations, if a guest or third party is injured in an accident that is related to alcohol consumption and the drinking can be linked to the host, the host could be held responsible for the payment of medical bills, vehicle repair costs, lost time from work and—in the worst case—claims for wrongful death resulting in huge monetary settlements.

The survey found that:

• Almost 46 percent of homeowners thought they were not liable in the event that a guest became seriously ill from catered food consumed at the host’s home

• About 22 percent did not think they could be held responsible if a guest was injured on the sidewalk in front of their property.

• More than one-third of homeowners either did not think they could be held responsible or admitted they did not know, if they destroyed another home with a careless act.

The bottom line is that homeowners could, in fact, be held responsible in any of these scenarios or accidental incidents, Trusted Choice said. It recommended that consumers review the homeowners policy and understanding the coverage. Homeowners also should consider expanding coverage by purchasing a personal umbrella policy with greater limits, especially for anyone who is a frequent party host.

Other recommendations:

• Limit the guest list to those you know.

• Host a party at a place with a liquor license, rather in a home or office.

• Provide filling food for guests and alternative non-alcoholic beverages.

• Arrange transportation or overnight accommodations.

• Stop serving alcohol at least one hour before the party is scheduled to end.

• Do not serve guests who are visibly intoxicated.

Agents Eager To Invest In Future Generations, IIABA Finds

The majority of independent agents would like to see the insurance industry do more to encourage high schools and colleges to guide students toward an insurance industry career, and many said they would help with internship programs.

The findings were part of the bi-annual “Agency Universe Study” conducted by Future One, a collaboration of the Independent Insurance Agents & Brokers of America and leading independent agency companies. The study involved approximately 1,900 agencies answering questions by the Internet and a small sampling of participants by fax.

According to the survey, 56 percent of respondents stated that the insurance industry should encourage high schools and community colleges to help students plan for insurance careers. Forty-five percent of agencies said they would consider participating in an internship program to bring new people into the industry.

“Young people, women and minorities continue to be underrepresented in the independent agency system, particularly among agency principals,” Madelyn Flannagan, vice president for education and research with the Alexandria, Va.-based IIABA, said in a statement.

The study found that 11 percent of the agencies participating in the study are relatively new, founded in 2004 or later (including 4 percent founded in 2007 or 2008).

A positive finding was that new agencies were mostly headed by younger principals. The average age of respondents from all agencies is 52, compared to 47 from new agencies.

“The average age of a professional in the insurance industry is 54, and 60 percent of insurance industry professionals are older than 45,” noted Robert Rusbuldt, IIABA president and chief executive officer. “Many in the industry laud the “Big ‘I’ InVEST program as one of the most important projects to ensure the continuing success and growth of the independent insurance agency system.”

InVEST is the IIABA’s education initiative to raise awareness of insurance industry careers in high schools and college.

“As more baby boomers retire, the need for young talent is evident,” said Bill Pierson, IIABA assistant vice president of agent development and executive director of the InVEST Program. “To combat the generational transition, action needs to be taken now to train entry-level recruits and cultivate the growth of management-level employees so they can take over as boomers retire.”