Five of the largest automobile insurance companies discriminate in their rate setting against people with lower education levels and lower status jobs, says the Consumer Federation of America (CFA).
The companies, in cities studied by the CFA, charge higher rates for liability coverage for those with lower education levels and with lower status jobs. That translates into discrimination on the basis of income and race, the CFA says.
The rate setting is unfair because all states except New Hampshire require minimum liability insurance and because access to a car is important in obtaining a job, says CFA Executive Director Stephen Brobeck.
The CFA is launching a campaign to have states ban discrimination in rate setting on the basis of occupation and education. The CFA held a press conference today to release the results of its rate study.
“Some states ban the denial of coverage on the basis of occupation or education, but we do not know of any that ban rate setting based on those factors,” Brobeck says.
Rates should be set on the basis of miles driven, the number and seriousness of moving violations and the number and seriousness of accidents, the CFA says.
A survey of more than 1,000 Americans showed that 68 percent feel it is unfair to set rates on the basis of education and 65 percent feel it is unfair to use occupation in setting rates, the CFA says.
The CFA looked at liability rates set by the 10 largest insurance companies by market share: State Farm, Allstate, Geico, Progressive, Farmers, USAA, Liberty Mutual, Nationwide, Travelers and American Family. It surveyed rates in Hartford, Conn.; Baltimore; Atlanta; Chicago; Louisville, Ky.; Houston; Denver; Phoenix; Oakland, Calif.; and Seattle.
The driver used in each example was a 30-year-old single woman, renting in a moderate-income area, driving a 2003 Honda Civic, with 10 years driving experience and a perfect driving record, who was without insurance for 15 days. In establishing the disparity in rates based on jobs, the CFA says it saw higher rates when it wrote "factory worker" as the occupation as opposed to "factory supervisor."
Five of the insurance companies, Geico, Progressive, Liberty Mutual, Farmers and American Family, apparently use occupation and education as rate setting tools in most states, CFA says.