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Can insurers consider your job when calculating auto premiums? – II

Sun May 15th, 2016 on     Insurance Claims,    

In our last post, we started discussing how a local television station recently conducted an experiment in which it sought online auto insurance quotes from two large insurance companies for two imaginary men, whose information was identical save for their occupations. Indeed, one was a surgeon and the other was a custodian.

Rather than finding that the two paid equal rates or the surgeon more, the investigators found the insurance companies offered the custodian quotes for a six-month premium that were 23 percent higher and 37 percent higher.

While this finding is shocking, it’s also somewhat fascinating.

That’s because research has actually shown that physicians are more likely to be involved in car accidents than people in other professions. Indeed, a 2004 study indicated physicians were 14 percent more likely to be involved in a crash than manual laborers.

What then is behind this wide disparity in quotes?

According to experts, it boils down to purely actuarial reasons in that surgeons, by virtue of their higher salaries, are statistically more likely to cover the costs for a minor accident out of pocket instead of filing a claim. Accordingly, even if surgeons do crash more, they still are less likely to cost the insurer money over the long run.

This naturally raises the question as to whether this consideration of occupation by insurance companies and the resulting differing policy prices is permitted under Florida law.

It may come as a surprise to most people to learn that it is, in fact, perfectly legal.

“If the data give an accurate view into the future of what the costs are – so insurance companies have the money to pay those claims – then it is fair, because it reinforces the insurance companies’ ability to pay what is owed for future losses,” said one insurance expert.

Despite the practice being legal, it doesn’t necessarily sit with well with many people, including state officials.

Indeed, outgoing Insurance Commissioner Kevin McCarty referred to the practice as “fundamentally unfair.” However, he also pointed out that real change can only come from the Florida Legislature, which has yet to take any sort of definitive stand on this issue.

As dire as this situation seems, there is perhaps one bit of good news. Experts indicate that several of the nation’s larger insurance companies do not consider occupation, such that in the hypothetical, the surgeon and the custodian would pay the same rate. In other words, it pays to shop around.

If you are involved in a prolonged and increasingly bitter dispute with your insurance company over an auto accident claim, consider speaking with a skilled legal professional committed to the pursuit of a fair resolution.

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