The Injustice of it All

Your auto insurance may be charging you more based on your education level or job, according to new statistics from the Consumer Federation of America (CFA).  Some of the most well-known auto insurance companies have been charging higher rates to people who have lower-status jobs or less education.

The research shows that for the minimum liability insurance required by the state, GEICO charges 21 percent more to someone with a high school education who works a blue-collar job in a factory as opposed to those given to a plant supervisor with a college degree in the Chicago area.  Before you get too disappointed in GEICO, realize that they are not alone in this practice.  Progressive, Liberty Mutual and Farmers insurance all charge higher rates to people in similar situations.

Why is this an issue?  According to the report, everyone in the study had a perfect driving record, making education and job title the only factors that had variance.  This puts lower-income workers in a tough spot because almost all states require insurance, making these drivers choose between higher insurance rates and breaking the law by going uninsured.  Unfortunately, some drivers do just that, according to the CFA: They estimate that between one quarter and one third of drivers with households earning less than $36,000 annually currently drive uninsured.

Because occupation and education are directly correlated with income and ethnicity, auto insurers aren’t allowed to use them as a way to deny coverage.  However, they have obviously been permitted to use them in setting the rates, which is why some annual premiums are as high as $3,000 or $4,000. These high rates effectively deny coverage to low income consumers.

In June 2012, the public was polled to find out what they thought about occupation and education being used as factors for determining auto insurance rates.  68 percent responded that it was unfair for insurance companies to use education as a factor and 65 percent said the same about occupation playing into the bottom line.  Luckily for these folks, there are auto insurers out there who don’t use these factors to determine their rates. Just another reason to do some research before deciding which insurer to go with!