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Is the Geico gecko just bad at math, or is this discrimination?

Mon Feb 23rd, 2015 on     Insurance Law,    

We are finishing up our discussion of the Consumer Federation of California’s complaint to that state’s insurance department about Geico Insurance Co.’s web-based application. According to the CFC, the app offers certain applicants policies with coverage limits that violate state consumer protection and auto insurance laws. The website asks for information in violation of state law as well, the CFC claims.

It isn’t the one-percenters who are getting the raw deal, either. These are low- to middle-income good drivers. Specifically, the affected drivers who are unmarried; unemployed, or, if employed, not working as professional or executive; not college graduates; and, lastly, not insured at the time of the application. Though the state requires Geico to offer them 15/30/5 coverage — see our last post for an explanation — the quotes are for 100/300/50 coverage.

If an applicant matches all but one of the criteria — is an executive or a college grad, is married, has coverage — the app offers yet another lowest limit quote. These applicants can purchase one month of 15/30/25 coverage.

Of course, coverage limits affect premiums. With homeowners insurance, for example, you can pay less every month if you opt for a higher deductible or lower coverage limits. By offering these applicants the inflated lowest limits, Geico is setting premiums that may be more than 50 percent higher than the 15/30/5 premium.

Geico is only offering these rates, though. The higher quotes may very well send applicants to other insurance companies. Apparently, that’s fine with Geico — and immaterial, according to the CFC. The process itself is discriminatory, the organization argues, and Geico should be penalized.

The state could impose fines or could go as far as revoking Geico’s license to sell auto insurance in California. The CFC asks that, at a minimum, Geico stop the discriminatory practice and start offering low- to moderate-income unmarried applicants reasonable — and legal — auto coverage.

There has not been an update since the story broke. We’ll keep track of the case, though.

Sources:

Insurance Journal, “California Consumer Group Seeks Enforcement Action Against Geico,” Feb. 13, 2015

Florida Jurisprudence, Second Edition, Permissible Rates and Rating Plans, 30B Fla. Jur 2d Insurance § 2088 (February 2015), via WestlawNext

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