For almost a decade, consumer and civil rights advocates have urged New Jersey lawmakers to bar companies from basing car insurance rates on socioeconomic factors they deem discriminatory and that have nothing to do with driving — things like credit history, marital status, education level, occupation and ZIP code.
They renewed their plea Monday, when the Senate's Commerce Committee called up a long-stalled bill for consideration — its third committee hearing since it was first introduced in 2018. The bill's supporters expressed frustration with the legislative inaction, with Danielle Combs of the NAACP's New Jersey state conference calling insurers' practice "thinly veiled discrimination."
"This proposed law is about more than car insurance rates. It's about justice. It's about dismantling systems that quietly but powerfully keep our communities at a disadvantage," Combs said. "When a single mother in Newark, Trenton, or Camden has to pay double what someone in a wealthier suburb pays for the same coverage and the same driving record, that is not fair, that is not equal, and that is not acceptable."
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The latest hearing comes seven months after the NAACP, Latino Action Network, and the Latino Coalition of New Jersey sued the state to compel change. A judge agreed in April to stay the case until October so the state Department of Banking and Insurance can review the issues. It also comes as car insurance premiums in New Jersey have soared since the pandemic, a trend critics say has fueled a spike in uninsured motorists amid broader affordability concerns.
But while the Senate panel's chair, Sen. Joseph Lagana (D-Bergen), conceded that using socioeconomic factors to set insurance rates could have "a discriminatory impact," the committee did not act on the bill.
Four insurance industry insiders testified against the bill, and several other business groups also registered their opposition. Lagana pointed to their objections as evidence the legislation needs more work before seeing a vote.
"We have to figure out how to balance the two and what should be the policy, to make sure that people are not disproportionately impacted by something that may be a legitimate rating tool," Lagana said. "And that's a very fine needle to thread."
Industry lobbyists insisted socioeconomic factors predict risk, are not discriminatory, and are an "actuarially justifiable" variable upon which they can set premiums predictive of loss.
"The bill before you today does not ban discrimination. New Jersey law already does that. The bill before you today bans accuracy," said George McNab of the National Association of Mutual Insurance Companies.
Gary La Spisa of the Insurance Council of New Jersey defended the industry's use of socioeconomic factors in setting rates, saying they're overseen by the Department of Banking and Insurance and every premium increase must be justified to get approval.
Barring any consideration of socioeconomic factors would force insurers to assume that drivers with different levels of risk represent the same risk, McNab added.
"The inevitable result is a one-size-fits-all pricing that is neither scientifically sound nor fair to New Jersey consumers," he said. "Riskier drivers would become harder to identify and would pay less than they should, while many responsible drivers will be asked to subsidize those higher risks."
But Javier Robles, president of Latino Action Network, pushed back on that argument. He reminded the panel that about a quarter of New Jersey's labor force is Latino, and half of those workers hold blue-collar jobs.
"When New Jersey allows insurance to charge higher rates based on education or job title, it punishes the very people who make New Jersey work. A home health aide shouldn't pay more than a health care executive with the same driving record. That's not risk-based pricing. That's bias, plain and simple," Robles said.
Basing rates on socioeconomic factors has unintended consequences, Consumer Reports' Chuck Bell noted, saying Garden State drivers with poor credit face higher surcharges than people convicted of drunk driving.
"Somebody who does one of the most dangerous things you can do on the road is charged less than somebody with poor credit," Bell told the panel. "People who live in lower-income neighborhoods are getting multiple gut punches because of the use of these factors, education, occupation, and credit history, and it's really time to take action."
That's especially true because a person's credit score could dip because of things outside their control, such as a layoff or medical emergency, added John Harmon of the African American Chamber of Commerce of New Jersey.
The bill's supporters noted that other states including New York have banned socioeconomic factors in premium determinations and yet "the auto insurers continue to do business," as Beverly Brown Ruggia of New Jersey Citizen Action put it.
Lagana assured supporters and critics alike that bill sponsor Sen. Teresa Ruiz (D-Essex) would use their testimony to tweak the bill. Ruiz did not respond to a request for comment.
The bill passed the full Senate in 2019 and 2021 but didn't advance at all in the last two legislative sessions and has never moved in the Assembly.
