Group Insurance

10 Pa. D. & C. 610

• Court: Pennsylvania Department of Justice
• Decided: May 8, 1928
• Status: Published

Opinion

Wagner, Dep. Att’y-Gen.,

We have your request for our opinion relative to the legality of what is known as “group insurance” as applied to the various classes of automobile insurance, including fire, theft, liability, collision and property damage lines.

We understand that certain insurance companies and agents and brokers are now writing, or contemplate writing, automobile insurance for all of the members of a group who desire to secure the same at rates which are less than those charged individuals, not members of the group, for the same kind of insurance. This insurance is written either by the issuance of a series of policies to the members of the group or by issuance of a master policy covering the entire group, with the issuance of certificates under the master policy to each member. The issuance of such group policies to the members of a designated automobile club or to the employees of a designated corporation are two examples of this method of writing insurance.

We are of the opinion that the writing of automobile insurance in this method is illegal, being in violation of the provisions of section 626 of the Insurance Company Law of 1921 (Act of May 17, 1921, P. L. 682), which is as follows: “Discrimination between individuals of the same class in the amount of premiums or rates charged for any policy of insurance covered by this act, or in the benefits payable thereon, or in any of the terms or conditions of such policy, or in any other manner ¡whatsoever, is prohibited.”

We are unable to understand how a method of writing insurance which will permit a member of an automobile club to obtain automobile insurance at a rate less than that required to be paid by an owner of another automobile resident in the same locality and subject to the same risks, who is not a member of the club, can be free from discrimination. The decrease in rate is dependent solely upon membership in a designated organization, and, in our opinion, a determination of rates upon this basis alone constitutes discrimination.

We are not to be understood as holding that discrimination prohibits reasonable and proper classification. Classification of rates according to the nature of the risk is well known in other lines of insurance. If, however, a classification is to be recognized, the rate applicable to the class must be applied to individuals as well as to members of a designated organization or group who are able to qualify and come within the classification. The basis for such classification will, of necessity, be established according to principles well known in the insurance world and applied in other classes of insurance, with such modifications as may be necessary to fit them to automobile insurance.

We are, therefore, of the opinion that the practice of writing automobile insurance to members of a group at rates less than those charged to individuals not members of the group is discriminatory and illegal.

Nothing contained in this opinion is to be construed as an expression of opinion legalizing what is termed “group insurance” as applied to any form of casualty insurance. From C. P. Addams, Harrisburg, Pa.