Auto insurers have long suggested that the level of educational attainment and occupation are indicators of the likelihood a potential customer will file a claim.
It’s an assessment of risk, they say. And since the data indicates it can be a predictor of potential costs, it is used to reward those who fare well in both categories. Simply put, more educated drivers with higher-paying jobs get better insurance rates since, statistically, they are less likely to file claims.
The practice begs three important questions:
- Is this data just being used as a way to justify charging those of lesser education and occupation more?
- Since that demographic often represents Black and Brown drivers in underserved communities, is it discriminatory?
- And what does education or occupation have to do with your ability to drive safely?
This afternoon in Trenton, leaders of the NAACP, the Latino Action Network and the Latino Coalition of New Jersey are taking on the issue. They have filed a landmark lawsuit against the state of New Jersey and the Department of Banking and Insurance, alleging the state has allowed discriminatory auto insurance practices that unfairly burden working-class, Black and Latino drivers.
The complaint, filed in the Superior Court of New Jersey, asserts that the state permits insurers to use education and occupation to set car insurance rates. Plaintiffs argue these factors have no connection to driving safety and instead serve as stand-ins for income and race, rewarding drivers with higher education and white-collar jobs while forcing those with less education and low-paying occupations to pay more, sometimes hundreds or even thousands of dollars more, each year for the same coverage.
The action comes after more than a decade of attempting to get a bill through the Legislature that would prohibit such action.
Alexander Shalom, partner at Lowenstein Sandler and chair of the Lowenstein Center for the Public Interest, said the lawsuit came after all other options were exhausted.
“These plaintiffs did not decide to sue the government lightly,” he said. “After decades of meetings and appeals without meaningful change, the courts are now the only path to accountability.
“This case challenges a system that punishes people for who they are instead of how they drive.”
Richard Smith, president of the NAACP New Jersey State Conference, obviously agreed.
“For far too long, insurers have used education and occupation to justify higher rates for Black, Brown and working-class drivers,” he said. “A person’s degree or job title should not determine what they pay to drive. These so-called risk factors are thinly veiled discrimination that keeps communities at a disadvantage.”
The plaintiffs seek to compel the Department of Banking and Insurance to prohibit the use of education and occupation in auto insurance underwriting and rating, aligning New Jersey with national reforms that strengthen consumer protections and expand access to affordable coverage.
It will not be an easy fight.
Only a handful of states outlaw this practice (New York is one). If passed, it certainly will raise rates for more affluent drivers. How much is unclear. The groups estimate the increase typically could be in the 15%-30%, though it could be much higher. It also figures to the lower rates for those in underserved communities by similar margins.
Proponents contest that more affluent drivers are more capable of paying an increase. And they reject the notion that such a change would be discriminatory against their community, pointing out that auto insurance is mandatory (not optional) and because of that, risk must be better distributed.
They also argue that more equitable rates would serve a greater purpose: Getting more drivers insured.
Despite laws mandating insurance, many drivers are uninsured. Cost is often listed as the reason why — especially among people with lesser means.
While the suit is the start of what could be a very long process, there is a shortcut solution, proponents say.
If Governor-elect Mikie Sherrill pushes for this revision — and proponents suggest she has indicated a willingness to do so — the change could be implemented by DOBI in the coming months.
Sherrill, in Washington for a House session regarding the government shutdown, did not immediately respond to a request for comment.
Maria Andrade, executive vice president of the Latino Action Network, remains hopeful change will come. She said it’s a matter of fairness and decency.
“When insurers use your job title or education level to determine your premium, they are not measuring risk, they are measuring privilege,” she said. “Allowing this practice tells our communities that the work we do or the opportunities we have been denied make us worth less. This lawsuit says enough.”
Rev. Eric Dobson, faith leader and longtime advocate for equity, couldn’t agree more.
“When a system charges people differently because of their job or education, it reflects a moral failure,” he said. “The state should not waste one more day defending discrimination. Stand with the people, stand with justice and build a New Jersey that practices what it preaches.”
Frank Argote-Freyre of the Latino Coalition of New Jersey said the impact of the change would be great.
“Our members include thousands of laborers, small business owners and essential workers who keep this state moving,” he said. “When a home health aide pays more than a healthcare executive with the same record, that is not risk-based pricing. That is bias.
“Hard work should open doors, not raise premiums.”
