So you haven't had an accident in years. That means you're pretty much guaranteed low rates…or so you thought. We all have a certain amount of mistrust for insurance companies. But now they've proven to be super sneaky by using factors that have nothing to do with your driving record to determine your rates – such as education and occupation. In fact, lower income drivers tend to pay very unfair rates, according to a recent article in the New York Times. To combat this ridiculous practice, the Consumer Federation of America is urging commissioners to ensure that insurance premiums are primarily based on factors such as accidents, miles driven and speeding tickets.
The federation uncovered these sneaky practices by obtaining insurance premium quotes from websites of the five major auto insurance companies (State Farm, Allstate, Geico, Progressive and Farmer's). In pricing limited liability coverage in five cities, they included several variables in their research. For example, a 35-year-old woman with a good driving record was given different characteristics such as marital status, education level, occupation, home ownership and gaps in insurance coverage, while having the same driving record in all cases. Oddly the study found that annual premiums were considerably lower if the woman was married, had a college degree, a professional career and no gaps in coverage. In fact, premiums were lowered by at least 68% in four cases. If the woman was single, had a moderate income, only a high school degree, worked in a clerical position and had gaps in coverage, premiums were much higher.
I'm sure you find it as absurd as I do that a person's income, marital status and other non-driving related factors should determine their insurance rates. As these rates are regulated at the state level, commissioners and legislatures are responsible to oversee the insurance companies and decide exactly what factors should be used to determine insurance premiums. We're all required to have auto insurance, but insurance companies are making premiums unaffordable for the middle-class to lower middle-classes. How unfair is that? For more examples and further explanation, see the full article in the New York Times below.