After honing the art of articulating what he alleges are discriminatory practices among automotive insurers, Eric Poe was once again first in line to stand before New Jersey policymakers last week, giving soaring testimony — one that he had to begin with an apology.
He’s passionate, he said, but that’s often mistaken for anger or arrogance.
He’s frustrated. It’s something he feels shouldn’t even be an argument.
Simply put, Poe feels something needs to be done about the in-built biases in auto insurance underwriting. And, he might add, why hasn’t something been done already?
The industry he himself is in — he is the chief operating officer of the not-for-profit CURE Auto Insurance — uses four things to determine auto insurance rates, none of which has anything to do with driving, all of which disproportionately hurt people of color and lower-income individuals:
- Educational attainment;
- Homeownership;
- Occupation;
- Credit scores.
The bill he was providing testimony for (S111) before the state Senate Commerce Committee — which successfully earned a 3-1 vote and was released to the full Senate — would force auto insurers to use only the most obvious factor in determining insurance rates: driving records.
The N.J. legislation, sponsored by Sens. Nia Gill (D-Montclair), Teresa Ruiz (D-Newark), Nilsa Cruz-Perez (D-Camden) and Nellie Pou (D-Paterson), mirrors what’s being pushed on the federal level at the same time by two New Jersey policymakers, with separate bills in both the U.S. Senate and House of Representatives.
Whether the result will be different than the many other times Poe testified in front of the New Jersey Senate, Congress and even other state legislatures is not something anyone involved feels overly certain about.
The only certainty — or, at least, the certainty of some anonymous figure who delivered an unmarked envelope to Poe’s company — is that Poe would be the right person to make the case for it.
Fifteen years ago, he was dumbfounded to be the chosen recipient of a pile of internal insurance company memos describing in detail the practice of using non-driving factors to determine insurance rates.
Apparently, the sender knew something about his personality.
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Poe has never given up on whistlingblowing on his own sector, even if his years of outspokenness have earned him the animus of the entire industry around him. There are a few companies besides CURE Auto Insurance that don’t take advantage of the way businesses are allowed to categorize customer risk with non-driving factors.
But there hasn’t been much movement to change things.
The last time Poe’s crusade had as much promise behind it was in 2007, after a Star-Ledger article revealed how the insurance industry operated and two bills were sponsored in reaction to it (but later lost traction). Poe said he was immediately pulled into a meeting with an industry group.
“They asked why I was doing this; and I said, ‘Well, I think it’s wrong,’” he said. “You know what they said? I’ll never forget it. ‘Eric,’ they said, ‘you’re talking about ethics, and we’re talking about business.’”
Poe said he’ll be first to admit it: He was never too good at telling the two apart.
Although Poe has experienced many ups and downs in the mission he’s taken on himself in the years since having that mystery package fall in his lap, he’s just as certain that good business and good ethical business practices aren’t mutually exclusive.
There are other New Jersey business leaders who tend to agree with him. John Harmon, CEO of the African American Chamber of Commerce of New Jersey, has been a close ally throughout the years.
He, like Poe, believes that the industry’s socio-economic classifications have unfortunately been used as a proxy for race, even if a person’s race cannot be asked for directly by companies.
“When you look at Black and brown people in New Jersey, you have the highest poverty, highest unemployment, lowest net worth,” Harmon said. “But you need a car to get to work, school or to just be a caretaker. … Why in the world would you be penalized for your education, credit score or occupation?”
Harmon notes his priorities are squarely business-first: He always wants companies to be as profitable as possible, he said.
At the same time, he also wants there to be a fair and amicable relationship between consumers and businesses in the Garden State. And, at the very least, he’s asking for some transparency.
“Because some people are quite surprised to find out this even exists in New Jersey,” Harmon said. “Residents are being hoodwinked and bamboozled because they just don’t know. Along with the already high cost of living in the state, people don’t realize they’re being fleeced just to drive in the state.”
Ruiz is one of three Puerto Rican women (joined by an African American woman) in the state Legislature who have been disturbed by this enough to be the driving force behind a local change.
“Based on my own experience, my father only went through the fourth grade, and I’m curious if he was being charged extra his entire lifespan because he didn’t have a high school diploma or a bachelor’s degree,” she said. “But it didn’t make him a worse driver than what I was because I had a bachelor’s degree.”
She added that she’s been baffled by the reluctance of the industry to be upfront about how data could point to someone with a high school diploma being a worse driver than a Ph.D. graduate; or how the credit score of someone recovering from financial turmoil in their college years could indicate how reckless a driver they might be in their 30s.
If you’ve been looking for an example of the systemic issues faced by people of color, Ruiz might point you to this one.
“(Because) when you start looking at the data behind it — and the populations that perhaps have a fractured credit rating history or populations without bachelor’s degrees — it’ll keep pointing to the same types of communities that get infringed upon overall,” she said.
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Cynical as it may come across, Poe said it’s only due to a lack of awareness around this issue that insurance company marketing teams were able to “get equity from something like the Black Lives Matter movement” in the wake of George Floyd’s death earlier this year.
The hope of Poe and other advocates for this reform is that the current moment of racial justice reckoning is the right time to hold these companies to account.
“This isn’t imagery; this is reality,” Poe said. “People are being charged 70 to 80% more when they’re drivers with no tickets or accidents, simply because they don’t have a high-paying job. How does that continue to be OK … if we’re going to say something like Aunt Jemima isn’t?”
Overtly race-based insurance plans were once a standard practice at many of the country’s insurance companies. Through a combination of civil rights advocacy and the Civil Rights Act of 1964, insurers had to remove any and all questions about race from their application process.
Even so, major life insurance companies had to swiftly settle a number of class action lawsuits over the past two decades, as allegations piled up that race-based plans were being continued in different forms. A case involving Mutual Savings Life Insurance Co. was one such example. In the 2002 court filing, the plaintiff alleged that African Americans could historically purchase only “colored” policies, which had higher premiums than the company’s “white” plans.
Although these minority-designated policies were discontinued in the ’60s, the plaintiff in the case argued that the race-based distinctions did not end. The company was accused of either keeping minorities on expired policies or simply moving them to the “substandard” category of the company’s three sets of premiums.
Other life insurance companies — offering a product that’s not mandatory, unlike auto insurance, which is required under New Jersey law — have been the subject of state department examinations for practices that have led to higher premiums for African Americans.
Today, insurers across the board say they’re dedicated to maintaining a fair system for customers. David Snyder, who represents members of the American Property Casualty Insurance Association, the country’s main insurance trade association, said questions about occupation or education — used in combination with driving factors by insurance companies — just provide a more complete picture of a driver’s potential for filing a claim or the cost of claims.
“Auto insurers have collected data for decades and have found that the factors of education, occupation and credit-based insurance scores are all accurate variables for predicting the likelihood and cost of insurance claims,” he said. “There have also been numerous studies of these factors by state and federal regulators and others that have confirmed that they are accurate indicators of risk of loss and have shown that they are not proxies for race or income.”
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New Jersey didn’t always allow for this criterium to be used by insurance carriers. Some say the change to allow them was made in 2003, when state leaders wanted to entice GEICO to return to the Garden State after an almost 30-year absence.
Former Gov. Jim McGreevey, who was in office at the time, told ROI-NJ that this policy shift was in response to New Jersey suffering from a dearth of competition in the insurance market throughout the ’90s.
“That non-competition was precipitously driving up auto insurance prices,” he said. “It was having a detrimental impact upon the working poor. Basically, we relied on best practices that would reverse the trend of constant, adsorbent price increases.”
Sixteen years after that decision was made in New Jersey, McGreevey wouldn’t weigh in on the impact it’s having today. He did, however, say that he felt there was “always an opportunity for a reexamination of what’s working and what’s not.”
Prior to that time, there were certain membership-based insurers, such as NJM Insurance Group, the Garden State’s second-largest writer of personal auto insurance, that required applicants to belong to certain occupations or trade organizations. But no insurance carriers were using both occupation and education simultaneously on a large scale in the local market.
“New Jersey had been a consumer-protecting environment for car insurance,” Poe said. “And what’s happened since bringing GEICO and Progressive into the state? The uninsured population in the state has gone up.”
According to Poe, as well as available data from the Insurance Research Council, the uninsured motorist rate rose from 8% to 15% between 2007 and 2015 in New Jersey.
“We just about doubled the people who couldn’t afford car insurance as these factors proliferated,” Poe said. “We went up 86% in that time. If you would say that about any other insurance, or industry, you’d say it’s an epidemic that needs to be addressed.”
GEICO’s rating system, which is consistent with the country’s current statutes and regulations, puts individuals into one of a trio of companies it operates under.
Poe said the “preferred” company, which collects most of the company’s $1.8 billion annual revenue, awards far better rates to white-collar workers in the state’s most prosperous and least diverse communities. Citizen watchdog group New Jersey Citizen Action also has released reports that make an argument for the company’s tiering system being discriminatory.
A 2008 report from the New Jersey’s Department of Banking and Insurance disputed that notion. In its own analysis, the state agency found it was an “incorrect conclusion that drivers with blue-collar jobs and low educational attainment were ineligible for the best rating tiers and placement in preferred companies.”
Regardless, some states already have taken action to prohibit the use of certain non-driving factors in deciding car insurance rates and eligibility, including Michigan and New York.
In New Jersey, the aforementioned bill, S111, would strip auto insurance carriers of the ability to assign risk to an individual’s insurance plan based on that person’s education, employment, trade, business, occupation or any information from their credit report.
It’s a local change that Dena Mottola Jaborska, associate director at New Jersey Citizen Action, says is long overdue.
“We see this as a major racial justice issue that the state hasn’t yet reckoned with,” she said. “People should not be discriminated against and given a higher price for insurance if they’re good drivers. There’s no fairness in not basing rates on someone’s driving record.”
Jaborska added that it’s still at this point uncertain whether Gov. Phil Murphy supports the reform. Influential Garden State leaders with the governor’s ear, such as Harmon, believe he will support it, as it would be seen as a “no-brainer” for his oft-expressed stronger and fairer economy.
“Certainly, right now there’s a heightened awareness of the need to address racial injustice,” Jaborska said. “I have a lot of optimism that our Legislature will see this and advance it, but it’s a little early to say how it’ll look this time around.”
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Meanwhile, there are legislative efforts afoot that would force auto insurance companies to comply with those new rules nationwide. U.S. Sen. Cory Booker (D-N.J.) introduced the Prohibit Auto Insurance Discrimination Act last month, which would accomplish something very similar to New Jersey’s version of the bill.
And there’s yet another companion bill moving through the House of Representatives. It was introduced by U.S. Reps. Bonnie Watson Coleman (D-12th Dist.), one of the first political champions of this cause, and Rashida Tlaib (D-Mich.).
“We went from just one sponsor to now five congressional sponsors, including a companion bill introduced by one of the most notable senators in the country,” Poe said. “Look, anything can happen in November, but if the Democrats get the Senate, there could be real possibilities that this once thought of as an unlikely bill to get movement could become a federal law.”
Snyder, who serves as vice president, policy development, research and international, at the APCIA, said his organization respects the motivations of the sponsors of the federal legislation. He said they even, at the end of the day, share the same goal.
“We recognize that no one wants to pay more for insurance than they should,” he explained. “This is why insurers are committed to using a wide variety of objective data that has been proven to accurately predict an individual’s likelihood of filing a claim and the cost of claims.”
Snyder said the industry wants to address the factors that make insurance unaffordable for some drivers. However, he expects the rules being proposed would have the unintended consequence of eliminating the discounts that insurers have long offered individuals.
“This could result in millions of drivers paying more for auto insurance, making insurance rates less accurate and less fair for all consumers, and potentially reducing competition and consumer choice,” he said.
The industry congealing to oppose the legislation is something Poe and other advocates of the change expected. In some ways, they take it as a good sign — because, if the effort were clearly dead on arrival, no one would bother fighting it.
Regardless of what becomes of the various state and federal legislative measures in motion, Poe has no plans on ever putting the brakes on his advocacy.
In Poe’s opinion, a vehicle means much more than the steel, rubber and other physical components it’s made of. It’s also a vehicle for escaping poverty.
“That’s why I’ve refused to let this die,” he said. “It’s unfair, wrong — not something we should ethically be doing. The car is the single most important factor, I believe, in people getting out of poverty in this country. That’s something we have to fight for.”
