California blocks use of gender in setting insurance rates

Photo (c) Burhanuddin Helmi - Getty Images

New regulations require rates to be determined only by driving records

A lot of factors go into setting a consumer’s insurance rate but California officials say rates should mostly rest on the consumer’s driving record, not other things they can’t control.

The California Insurance Commission has issued new rules that bar insurance companies from using a policyholder’s sex to determine their rates. The state already prohibits insurance companies from using credit scores to influence a consumer’s rate.

“My priority as insurance commissioner is to protect all California consumers, and these regulations ensure that auto insurance rates are based on factors within a driver’s control, rather than personal characteristics over which drivers have no control,” said California Insurance Commissioner Dave Jones.

The rules, which took effect in early January, bring car insurance rates into line with provisions of Proposition 103, which was approved by California voters. That proposition prohibits unfair and discriminatory prices. It orders insurance companies to set rates based upon a consumer’s driving record.

Has no bearing on safety

The new rules were applauded by the consumer group Consumer Watchdog.

“Gender and sex have no more place in what we pay for auto insurance than race or ethnicity do,” said Carmen Balber, executive director of Consumer Watchdog. “These new rules will finally end gender-based discrimination in auto insurance pricing in California.”

The state’s Proposition 103 requires car insurance premiums to be based primarily on factors that a consumer can control. Legitimate factors include the consumer’s driving record, the number of miles they drive, and how many years they’ve had a license. It strictly applies California’s civil rights laws to insurance, banning the use of sex, race, or sexual orientation to determine what a consumer pays for insurance.

It’s a common belief that insurance companies always charge male drivers more than females for insurance, but a Consumer Federation of America (CFA) study suggests that is not always the case.

Different companies had different policies

CFA has reported that, in some markets, one insurance company would give a break on rates to a female driver while another insurance provider, in the same state, would charge a female customer more.

According to Consumer Watchdog, Geico often classifies women drivers as a higher risk. At the same time, studies have shown that State Farm usually treats men and women the same.

The California Department of Insurance found that gender’s effect on insurance rates previously tended to vary widely by geographic location.

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