PAID Act
The PAID Act (Prohibit Auto Insurance Discrimination Act) would bar private passenger automobile insurers and their affiliates from using certain income-related proxies to determine eligibility for coverage or to set premiums. Prohibited factors include education level, occupation, employment status, home ownership, ZIP code, census tract, marital status, credit scores, consumer reports, previous insurer, and prior purchase of insurance from the insurer. The bill requires insurers to show to the Federal Trade Commission (FTC) that their marketing, underwriting, rating, claims handling, and fraud investigations—and any algorithms or models used—do not disparately impact protected groups, and it would mandate public disclosure of underwriting rules and rate filings. It also creates enforcement mechanisms through the FTC, provides private and state-level remedies, and imposes a one-year lead time before the law takes full effect. In short, the bill aims to reduce differential pricing tied to income- or demographic-related factors in auto insurance, increase transparency in rate-setting, and strengthen federal and state enforcement against practices that discriminate or disproportionately harm protected groups.
Key Points
- 1Prohibition on income proxies: It is unlawful for private auto insurers and their affiliates to use listed factors (including gender, education level, occupation, employment status, home ownership, ZIP code, census tract, marital status, credit-based scores, consumer reports, previous insurer, or prior purchase of insurance) to determine eligibility or calculate rates.
- 2Disparate impact reporting to FTC: Within one year of enactment and then every two years, insurers must submit information to the FTC showing that their marketing, underwriting, rating, claims handling, and any algorithms/models do not disparately impact protected groups based on race, color, national origin, religion, sex, sexual orientation, disability, gender identity, or gender expression.
- 3Public filing transparency: All underwriting rules and rate filings must be publicly available for inspection; they cannot be treated as proprietary trade secrets.
- 4Compliance and penalties: The FTC enforces the Act; violations carry penalties and the Act allows private lawsuits for damages (with potential additional costs and attorneys’ fees) and state enforcement actions.
- 5Effective date: The Act would take effect one year after enactment.