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PCI Responds to CFA Study, Notes that Insurers Charge Actuarially Justified Rates

Posted on 24 Jul 2013 by Neilson

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PCI response to CFAAlex Hageli, director of personal lines policy for the Property Casualty Insurers Association of America (PCI), issued the following statement today in response to assertions by the Consumer Federation of America (CFA) about auto insurance pricing:

"Once again the CFA has released a study that it says shows insurers are pricing insurance based on something other than actuarially justified rating factors. This despite the fact that laws in all 50 states require insurers to charge actuarially appropriate rates. This despite the fact that state agencies charged with enforcing these laws in states such as Maryland and New Jersey have thoroughly reviewed insurers' use of rating factors such as education and occupation and found such use to be, without question, actuarially justified.

"We know that consumers want to be charged based on the level of risk that they represent rather than those rating factors some think are or are not appropriate for reasons having nothing to do with risk. We know that certain occupations are correlated with a lower level of risk and therefore, all other risks being equal, enjoy a lower rate. There are insurers that specialize in writing insurance to those in certain occupations, such as teachers (Horace Mann) and pharmacists (Pharmacists Mutual). It is doubtful these insurers would last long in a competitive marketplace by charging their target audience a higher rate than what other insurers charge.

"We continue to support, as we always have, the use of actuarially justified rating factors. Education and occupation are such factors. We have full confidence in state agencies to ferret out any inappropriate use of rating factors as alleged by CFA."  

PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write over $190 billion in annual premium, 40 percent of the nation's property casualty insurance. Member companies write 46 percent of the U.S. automobile insurance market, 32 percent of the homeowners market, 38 percent of the commercial property and liability market, and 41 percent of the private workers compensation market.