Auto insurance

Consumer Watchdog challenges GEICO’s $268 million auto insurance rate hike and insurance rate discrimination based on job and education

LOS ANGELES, August 9, 2022 /PRNewswire/ — Insurance Commissioner Ricardo Lara should reject GEICO’s proposal $268 million rising auto insurance rates and its discriminatory rating system based on employment and education, Consumer Watchdog wrote in a petition filed yesterday with the California Department of Insurance (CDI).

The increase is hitting working-class Californians the hardest. Drivers working in fields such as guarding, construction or catering will pay 25% higher premiums than drivers in GEICO’s preferred “professional” occupations, including lobbyists, architects and financial analysts. They will pay almost 11% more than engineers, auditors and judges.

Overall, the rate hike will impact 2.1 million GEICO policyholders who face an average $125 annual premium increase.

“With GEICO’s discriminatory rebates, investment bankers, consultants, surgeons and attorneys will benefit on the backs of low-income and blue-collar Californians,” the Consumer Watchdog attorney said. Daniel L. Sternberg.

At the same time that GEICO is seeking this rate hike, the company is closing its local offices in the state and laying off hundreds of employees. GEICO also stopped selling insurance through telephone agents in the state, leaving online options through a computer or mobile device as the only way to obtain a GEICO policy in Californiaand many other states.

“There should be no doubt that GEICO’s actions will harm California Drivers. Lack of internet access may California the most vulnerable communities are being left behind in their attempts to obtain home and auto insurance. Just as we’ve seen with the COVID-19 vaccine, the digital divide can lead to severe disparities in communities of color in their ability to access services,” Sternberg said.

GEICO has already received two rate hikes in California in 2017 and 2018 before the pandemic took drivers off the road and claims plummeted.

The insurance commissioner did not act on a settlement aimed at combating price discrimination based on employment and education.

Consumer Watchdog called on Commissioner Lara to reject GEICO’s use of jobs and education to overburden working-class Californians in this rate filing, and to push forward regulations to compel all companies to assurance to fairly evaluate Californians, regardless of their occupation or level of education.

Consumer Watchdog and 10 community and civil rights organizations have challenged auto insurers’ illegal and discriminatory use of employment and education to set rates in February 2019. In September 2019an Insurance Department survey confirmed these concerns, finding “great socio-economic disparities” created by insurance companies that overcharge California drivers solely on the basis of their profession or level of education. Three years later, Commissioner Lara has yet to pass a rule to end the practice, and the last potential draft rule was issued by the Department of Insurance nearly a year and a half ago.

Consumer Watchdog recently filed challenges against rate hikes by Mercury Insurance Company and Interinsurance Exchange of the Automobile Club (“Auto Club”) which also use a discriminatory rate system based on employment and education.

“Commissioner Lara must help working families and pass regulations to end occupancy-based premium surcharges. Instead of endorsing these discriminatory discounts, the commissioner should use his voter-enacted power under the Proposition 103 to protect middle- and low-income families from being charged higher prices based on their work,” Sternberg said.

Read Consumer Watchdog’s Hearing Petition and Intervention Petition: https://consumerwatchdog.org/sites/default/files/2022-08/2022-08-08%20GEICO%20PFH.pdf

Read the 2019 petition from community and civil rights groups: https://consumerwatchdog.org/sites/default/files/2019-02/Job%26EducationPetition.pdf

Occupation was never approved by regulation as a legal scoring factor under Proposition 103 passed by voters. GEICO’s unfairly discriminatory occupation-based rating system means lower-income and less-educated drivers continue to pay the highest premiums based solely on their job titles.

Voter-approved Proposition 103 requires auto insurance premiums to be based primarily on three mandatory factors — driving record, annual mileage and years of driving experience — and prohibits unfairly discriminatory rates. Proposition 103 prohibits this type of unfair price discrimination based on income or race.

SOURCE Consumer Watchdog