Study: Drivers In Minority Neighborhoods Charged Higher Auto Insurance Rates

A study by the Consumer Federation of America found that auto insurance rates for drivers in minority neighborhoods can be as much as 70 percent higher than drivers in white neighborhoods. The study found a discrepancy in auto insurance rates between minority and white neighborhoods in both urban and rural areas. A press release from the consumer watchdog group stated, “It is urgent that regulators, lawmakers, and the industry take a hard look at these findings.”

Details of Auto Insurance Rates Study

The auto insurance rates study examined quotes from the five largest auto insurance carriers: Allstate, Farmers Insurance, Geico, Progressive and State Farm. The study reviewed quotes on auto insurance rates from drivers with identical driving records and seeking identical coverage. The only factor they changed when gathering quotes was the ZIP code of the potential policy holder. The researchers found that drivers in ZIP codes with a high minority population were quoted between 25 and 70 percent more for the same policies.

Examples of Differences in Auto Insurance Rates

The group’s study revealed several examples of the differences in auto insurance rates between minority and white drivers. On average, drivers in neighborhoods with a predominantly African-American population paid $1,060 in premiums, while the auto insurance rates for white drivers was only $622, a 70 percent difference. In rural areas, the difference was only 24 percent, while urban drivers saw a 60 percent difference. Every company surveyed showed differences of at least 52 percent, with Progressive and Farmers showing the largest discrepancies at about 92 percent.

Auto Insurance Rates Study Shows “Troubling Pattern”

Tom Feltner, director of financial services at the Consumer Federation of America, issued the news release that revealed the results of the auto insurance rates study. The statement mentioned that the study’s results “suggest a troubling pattern of high rates in African American communities, regardless of driver history.” J. Robert Hunter, Director of Insurance for the group, told reporters that the differences in auto insurance rates “are hard to fathom actuarially and look a lot like unfair discrimination.”

Carriers Deny Racism in Auto Insurance Rates

Officials with the Insurance Information Institute refute the idea that differences in auto insurance rates are tied to racial discrimination. Steven Weisbart, I.I.I. senior vice president and chief economist, disputed the CFA’s research methods. In an interview with the Baltimore Sun, Mr. Weisbart said that the auto insurance rates study failed to account for factors such as credit score, crime statistics, and accidents in a specific ZIP code. He said that any differences “would arise out of other factors” and insurers “couldn’t, even if they wanted to, charge higher rates for African-American policy holders.”

Source: Property Casualty 360

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