Editorial
Insurance industry has a selling job to do
Common sense tells you that factors such as age or driving experience can be good indicators of how much of an insurance risk an individual motorist might be.
Thus it seems logical that insurance companies would use these and other factors in determining how much to charge a customer in premiums. The only problem with this scenario, however, is that it is illegal.
Under Hawai'i insurance law, it is illegal to consider such things as race, age, ethnic extraction, marital status, credit bureau ratings or disability when determining premiums.
But a quick review by Insurance Commissioner Wayne Metcalf has discovered that more than half of the firms selling insurance in the Islands have used such illegal criteria in setting rates.
A threshold question here is why it took a national uproar over the use of credit ratings by insurance companies to generate the review of insurance practices here. If the law was not being followed, shouldn't the insurance commissioner's office have been aware of it before now?
But now that the topic has been broached, Metcalf is on the right track with his comprehensive review of policy-writing practices of all firms selling car insurance in Hawai'i. The issue of using credit "scores" in setting policy rates is particularly troublesome.
While there may be some correlation between those with bad credit histories and those who are poor insurance risks, it is unfair to use the credit history as a reason to increase premiums.
Once the company agrees to do business with a customer, it should do so on the same basis as all other customers. Critics have also noted that using credit histories as a tool for premium setting tends to favor the affluent, whose ability to keep their bills covered has little to do with their driving ability.
There may be an argument that age (either those who are extremely young or at the other end of the age spectrum) can be statistically shown to be a higher insurance risk.
If that case can be made, then it is up to the industry to persuade lawmakers to change the law.
But until that point, the law is the law and it should be obeyed.
