Seven local auto insurers to pay $115,000 in fines
By Frank Cho
Advertiser Staff Writer
Seven Hawai'i automobile insurers have agreed to pay more than $115,000 in fines to the state for illegally using criteria such as credit history, age or driving experience in determining auto policy premiums.
The seven companies — AIG Hawaii Insurance Co., Allstate Group, Hartford, Maryland Casualty Co. (Zurich), RLI, State Farm Group and USAA Group — represent about 60 percent of Hawai'i's auto insurance market.
Fines against four other companies: DTRIC, HIG, TIG and Progressive, representing another 10 percent of the market, are still pending resolution, the state's insurance commissioner said yesterday.
The fines come after the state launched an investigation of the auto insurance industry in August and found widespread violations of Hawai'i insurance laws that prohibit using criteria such as a person's age, gender, credit history or marital status in determining auto insurance premiums.
"Hawai'i has a clear law that prohibits auto insurers from using discriminatory criteria when determining the premiums motorists are charged," Wayne Metcalf, the state insurance commissioner, said yesterday in announcing the fines.
Metcalf said all of the insurers contacted by regulators during the investigation have agreed to stop using criteria considered illegal under state law, and said some drivers could see their rates drop as a result.
• State Farm Group paid the biggest fine, $40,000, for the violations and has since ceased using the illegal criteria, Metcalf said. State Farm is the state's largest auto insurance carrier.
• AIG agreed to pay $20,000 in fines for using age and credit information when determining auto policy rates.
• Allstate Group agreed to pay a $20,000 fine for using length of driving experience and credit information in violation of state law. Allstate is already appealing similar violations the state found in 1997 to the Hawai'i Supreme Court.
• Hartford agreed to pay a $10,000 fine for using length of driving experience and people's physical handicaps to set rates.
• Maryland Casualty is paying a $10,000 fine for using age, driving experience and physical handicaps to determine auto insurance rates.
• RLI has paid a $5,500 fine for using length of driving experience.
• USAA Group agreed to pay a $10,000 fine for using age and length of driving experience and has started a restitution plan to repay drivers who were affected. The restitution fund to repay drivers is valued at about $100,000.
If insurers choose to dispute a fine, an administrative hearing could be held. But Metcalf said the state would then seek fines for each individual policy violation the insurer is found to have committed, which could drive an insurer's fines into the millions of dollars.
About 175 companies are licensed to write auto insurance policies in Hawai'i, but only a small percentage actually do, according to state insurance records.
The state investigation into auto insurance premiums was triggered after an article in The Advertiser in August quoted a State Farm official saying the company used credit bureau information as a factor in determining local drivers' premiums.
Hawai'i's insurance code prohibits insurers from considering race, age, ethnic extraction, creed, length of driving experience, marital status, credit bureau ratings or physical disabilities when determining premiums.
Nationwide, however, more than half of all auto insurance companies are believed to use credit scoring in setting rates, a practice that has drawn fire from some consumer advocacy groups.
Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com.
