A person’s income bracket, rather than driving history, may be a major determinant of how much they pay for motor insurance cover, according to the result of a survey by the Consumer Federation of America.
Aggregating auto insurance quotes from websites in 10 big cities in the USA, the advocacy group discovered that in 53% of cases, a moderate-income drive who has a clean driving record was billed more for basic auto liability insurance than a driver who earned higher but had in the past caused an accident in which someone was injured.
The research, which polled 464 quotes, also found that in 21 of 30 tests where it was possible to make a comparison, a driver who earned a moderate income but with a decent driving history got a higher insurance quote than a driver who is a high-earner but has been recently convicted for drunken-driving.
Robert Hunter, director of insurance for the consumer federation said it was profoundly unfair for insurers to use nondriving-related factors in setting rates for auto insurance.
But defending the industry, David Snyder, vice president of policy development and research at the Property Casualty Insurers Association of America faulted the report, and insisted that most insurance solutions providers only considered criteria like the driver’s age and their driving record. He said these were accurate predictors of risks and helped in arriving at the right pricing of premiums.
Industry experts Quote Centers “Say car insurance quotes essentially considers demographics like sex, age group, place of residence, marital status, driving history, previous insurance coverage in setting premium rates; and advocate shopping around to get the best quotes for the coverage needed.”
However, the Consumer Federation of America said its analysis used as proxies for income socioeconomic factors like occupation and education which insurers considered in setting rates. For example, in its study the group characterized an upper-income American as having a master’s degree and working as a bank executive; while a low earning driver was given the attribute of possessing only a high school diploma with a bank teller job. But the drivers in each test shared some basic denomination like age bracket, license duration and the type of car they drove.
The analysis showed insurers quoted different rates and that Los Angeles was the only city where the lopsided rating criteria did not apply and a more careful but not-so-rich driver paid less premium than the affluent driver with a poor driving history. Doug Heller, author of the study and an insurance expert with the consumer group attributed this to California’s strong consumer protection policies on auto insurance pricing. For instance, the city disallows using a driver’s former insurance coverage record to set rates.
