Major Auto Insurers Raise Rates Based on Economic Factors
Consumer Federation of America | Page 14
In addition to refusing to quote lower economic status drivers, there were several instances where
customers with lower economic status characteristics were not offered policies from the standard
insurance company but, instead, from an affiliated company. This study did not determine if these
companies would have charged a lower rate had the customer been offered a policy from the
standard company or if, in some cities, the companies only write policies for lower economic status
drivers through their non-standard affiliates.
Conclusion
The basic liability insurance that drivers in all states but New Hampshire must purchase presents a
difficult financial challenge for many low- and moderate-income Americans. That difficulty is
exacerbated by an insurance pricing system that punishes good drivers through the use of non-
driving related factors that are strong indicators of customers' economic status. As a result:
good drivers with lower levels of education pay more;
good drivers with blue collar, low-skilled and semi-skilled jobs pay more;
good drivers who rent their homes rather than own pay more;
good drivers who had a break in coverage because they didn't have a car pay more; and
good drivers who are single rather than married pay more.
When taken together, the cumulative impact of these non-driving rating factors pushes rates up by
59 percent, or $681, each year for drivers with perfect driving records but non-driving
characteristics that suggest a lower economic status in society.
These pricing practices, common among most major carriers, as well as the use of credit scoring,
are rejected as unfair by a substantial majority of Americans. Most Americans believe that it is fair
to set rates based upon driving-related factors such as accidents caused and traffic violations but
not based on the non-driving related factors tested in this study.