Consumers Disapprove of Factors Auto Insurers Use to Set Prices

The Consumer Federation of America (CFA) recently released a survey indicating that the non-driving factors used in setting auto insurance prices, such as level of education, occupation, and lack of previous insurance, are considered unfair by consumers. A CFA analysis found that these factors are used by most major insurers and can increase premiums by more than 100 percent.

Stephen Brobeck, Executive Director of CFA, said “Insurers are permitted to use factors such as education and occupation in setting prices even though these factors have nothing to do with driving and discriminate against lower-income drivers . . . Premiums should largely reflect factors such as accidents, speeding tickets, and miles driven, over which drivers have some control and which directly affect insurer costs.”

The survey was based on interviews conducted on about 1,000 adult Americans. As stated by the CFA: “The analysis of auto insurance premiums, which used the websites of the five largest auto insurers, priced minimum liability coverage for a 35-year old woman with a good driving record in five cities, while altering characteristics such as marital status, educational levels, occupation, homeownership, and other attributes. The companies were State Farm, Allstate, GEICO, Progressive, and Farmer’s, which together have more than half the private passenger auto insurance market. The cities were Baltimore, Miami, Louisville, Houston, and Los Angeles.”

Lucky for Californians, “the lowest rate quotes are in California because it regulates insurance premiums more effectively than any other state,” noted J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner. “California prohibits or limits insurers from using non-driving factors to set premium levels,” he added. The complete analysis, along with tables, can be found here.