Geico Accused of Job, Education Bias on Rates ; Auto Insurer Denies Favoring Professionals With Higher Degrees

By ELISE YOUNG, TRENTON BUREAU

TRENTON A group of consumer and minority advocates Wednesday accused Geico, the state's third-largest auto insurer, of unfairly quoting higher rates to motorists who lack college degrees and work blue-collar jobs.

Geico denied the claim, saying its 600,000-plus policyholders have not been subject to discrimination. The company facing similar criticism in other states and a federal class-action lawsuit over the same issue said it uses the information in combination with 23 other factors to calculate annual premiums.

"Decades of data that show that people in some occupations or educational groups are less likely to have losses," the company said in a statement. "No single factor is ever used exclusively or even primarily to determine a rate."

But at a State House news conference, New Jersey Citizen Action said that wasn't the case in a study involving 449 hypothetical applicants on the widely advertised Geico.com Web site.

In each side-by-side test, the information entered age, gender, residence, auto model and other factors was identical. Then the occupation or education data were altered.

Potential customers with only a vocational or high school diploma were asked to pay an average 19 percent higher than those with a bachelor's or higher degree, the study found. Those with non- professional jobs were given a rate 27 percent higher than those in white-collar positions.

"What does one's occupation and education have to do with driving an automobile?" asked Dick Barber, treasurer of the New Jersey chapter of the NAACP.

"This is a horrendous thing," said Phyllis Salowe-Kaye, executive director of Citizen Action.

Citizen Action noted that other insurers also use the information, but said it was going after Geico because it was the largest in that group.

State Sen. Nia H. Gill, D-Montclair, who is sponsoring a bill to eliminate the practice, said that job and education have become proxies for race and income factors that are illegal to consider when setting rates for auto insurance in New Jersey.

"The effect is quite clear for people who are less educated and have lower occupations," Gill said. "These are middle-class suburban people. It's not just a poor person's issue."

New Jerseyans have the country's highest auto insurance rates, paying an average $1,221 per policy in 2004, the most recent figure available. That's 46 percent higher than the national average, $838.

Geico started underwriting in New Jersey in 2004, a year after reforms were enacted to entice more insurers to do business here, conceivably leading to more competition and lower rates. The company said its practices were sanctioned by the New Jersey Department of Banking and Insurance.

"We don't take out education and occupation and say, 'Oh, we have the magic bullet,'" said Rynthia Rost, vice president of Geico public affairs. "We save New Jersey citizens money. We're here to make New Jersey one of our biggest states."

Geico said it insured 616,235 automobiles in New Jersey as of Dec. 31, and saved the average policyholder $750 annually.

"Geico did not get to be the fourth-largest private-passenger auto [policy] writer in the United States and the third-largest in New Jersey by being unfair to anyone," the company said in a statement. "If Geico [were] charging unfair rates, drivers would be flocking to our competitors and Geico would be shrinking, not growing, in New Jersey."

Jim Gardner, a spokesman for the state Department of Banking and Insurance, confirmed that auto insurers are permitted to use job and education information. Four companies choose to ask for education and three ask for occupation, he said. Only Geico and one other company Electric Insurance use both, he said.

Banking and Insurance has received three complaints about Geico's changing rates, Gardner said. He declined to say whether those complaints were under investigation.

The practice has come under scrutiny in other states in the past year.

Regulators in Maryland, where Geico is based, concluded last year that Geico was lawfully collecting the information for its underwriting. Also last year, the Consumer Federation of America complained about Geico's methods in Florida.

In April, the company was named in a federal class-action suit filed on behalf of African-Americans in Minnesota, who claimed they were quoted higher rates because they had comparatively little education and low-paying jobs. Geico has denied the claim.

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(SIDEBAR)

Unfavorable comparisons

Comparison of Geico rates on its Web site, July and August 2006. Applicants are hypothetical:

Applicant: Female, 51, Camden, 2000 Buick Century

Rate as corporate vice president with Ph.D.: $1,063.10

Rate with high school diploma only: $1,712.30

Difference: $649.20, or 61 percent

*

Applicant: Male, 51, Highland Park, 2004 Ford Taurus SE

Rate as architect with master's degree: $644.80

Rate as repairman with master's degree: $993.30

Difference: $348.50, or 54 percent

*

Applicant: Male, 51, Camden resident, 2002 Subaru four-door Forester

Rate as developer with Ph.D.: $1,060.10

Rate as construction worker with high school diploma: $1,663.90

Difference: $603.80, or 57 percent

Source: N.J. Citizen Action

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(c) 2007 Record, The; Bergen County, N.J.. Provided by ProQuest Information and Learning. All rights Reserved.