DC Market Conduct Report Shows Differences in Insurance Premiums are Driven by Differences in Losses and Claims

WASHINGTON - The American Property Casualty Insurance Association (APCIA) today released the following statement, attributed to Robert Gordon, Senior Vice President Policy, Research, and International, at APCIA, regarding the District of Columbia Department of Insurance, Securities and Banking's (DISB) Market Conduct Report on Unintentional Bias in Auto Insurance.

"Through its own analysis to ensure rates are not unfairly discriminatory, DISB confirms that differences in premiums are driven by differences in losses, and the systems insurers use to produce quotes reasonably reflect the policies offered to potential customers and are reflective of the sound risk-based pricing methods being used in the market. Insurers use a variety of actuarially sound and predictive driving and non-driving rating variables to fairly and accurately price policies, which benefits consumers with lower rates overall, more choices, and greater market and price stability.

"It is critically important to understand that insurers do not collect race information and do not use race information in any way, including to set insurance premiums. While DISB created and used racial categories in its report, insurers base rates on risk, not race. DISB's analysis found that, whenever a group paid higher premiums, it also had more accidents, more claims, and generated more in losses, and therefore this group paid more in premiums. Higher losses and more claims translate into higher premiums.

"Based on the extensive data collected by DISB, the report proves that insurance premiums accurately reflect insured losses. Instead of more costly analysis of insurance rating factors, which again will show that premiums accurately reflect risk, the best next step would be to work together to help bring down the underlying losses so that premiums can decline, especially for those who are paying the most. Not only would this improve insurance costs but would also help save lives and prevent injuries and related economic losses."