Major Insurers Charge Moderate-Income Customers With Perfect Driving Records More Than High-Income Customers With Recent Accidents

http://consumerfed.org/press_release/major-insurers-charge-moderate-income-customers-perfect-driving-records-high-income-customers-recent-accidents/

September 26, 2016

Auto insurance prices are often more closely aligned with personal economic characteristics than with drivers’ accident and ticket history, according to new research by Consumer Federation of America (CFA). Testing premiums offered by the nation’s five largest insurers in ten U.S. cities for drivers with different socio-economic characteristics and different driving records, CFA found surprising results, including:

Upper-income drivers with DUIs often pay less than good drivers of modest means with no accidents or tickets on their driving record.

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Moderate-income drivers with perfect records pay more than upper-income drivers who caused an accident in which someone was injured.

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Progressive and GEICO consistently charge upper-income bad drivers less than moderate-income good drivers.

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Moderate-income good drivers often pay more than upper-income drivers with multiple points on their record.

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Moderate-income good drivers often pay more than upper-income drivers with multiple points on their record.

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According to CFA’s premium testing, it costs a moderate-income good driver more for basic auto insurance than an upper-income driver convicted of driving under the influence (DUI) in the past 12 months over two-thirds of the time. Of the 30 instances in which companies offered a quote both to an upper-income driver with a DUI and a moderate-income driver with a clean record, 21 times the driver with the perfect record paid more,

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“The data show that Progressive and GEICO are competing vigorously for the business of upper-income drivers regardless of their driving record, and they’re subsidizing that competition by overcharging moderate-income drivers with clean records. As we have seen in other research for these two insurers, auto insurance appears to be a loss-leader and marketing ploy for gaining access to higher-income people to try to sell them other products. This is unfair discrimination in my estimation and illegal in all states.” said Hunter of CFA, who is also an actuary.

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California was the only market tested in which the good drivers always paid less than the drivers with marks on their driving record. This state has the nation’s best consumer protections in place when it comes to preventing the unfair pricing revealed in CFA’s report.

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