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Working class pays more for auto insurance

Study by Consumer Federation of America shows that those with less education and lower level jobs pay higher premiums.

By Mitch Lipka Jul 23, 2013 3:44PM
Image: Car Accident (© Stockdisc/Corbis)It's more than what kind of car you drive and where you live that affect auto insurance rates. How far you went in school and what sort of job you hold can play a role, too, according to a newly released analysis by the the Consumer Federation of America.

The study compared how much minimum liability insurance -- the least allowed by law -- would cost for a factory worker with a high school degree vs. a supervisor at a plant with a college education. In Seattle, one insurer quoted a rate 45% higher for the factory worker. The worker also would pay 40% more in Hartford, Conn.; 33% more in Oakland, Calif.; and 21% more in Chicago.

Another insurer quoted a 33% higher rate in Baltimore for the factory worker. Other than their education level and income, based on their jobs, the rest of the information to get the price quotes was the same, the CFA said.

"Auto insurers charge high premiums for minimal coverage to most working people, even those with perfect driving records, who live in urban areas," said CFA Executive Director Stephen Brobeck. "Since most Americans need a car, and almost all states require the purchase of auto insurance, many lower-income workers are faced with the choice of paying these high -- and often unaffordable -- prices, or breaking the law by driving without insurance."

The CFA has long championed the idea of insurance rates not being influenced by economic factors. In January, the group released another study that showed an executive with a poor driving record who owns a home more often than not will get charged less than a receptionist who rents an apartment but has a perfect driving record.

The group cites a survey conducted last year that showed most Americans don't think education or income should play a role in insurance rate setting. Many insurance companies have maintained that these factors, and an applicant's credit score, have proven to be reliable predictors of the likelihood a policyholder will file a claim and therefore are relevant and should be considered when quoting a premium.


The CFA dismisses the industry's arguments and, based on the national survey, says American consumers do, too.

"The American public knows that it is unfair for auto insurers to use factors like education and occupation in setting rates," said CFA Insurance Director J. Robert Hunter.  "In effect, auto insurers are discriminating on the basis of income and race. States should prohibit the use of these demographic factors that bear no logical relation to insurer risk."
Not every insurer uses the same factors to calculate premiums, and the differences from company to company can be considerable. So consumers are urged to get several price quotes before buying auto insurance.

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8Comments
Jul 23, 2013 4:56PM
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It really shouldn't come as much of a shock to anyone that the Rich and the elite get all the breaks regardless if they break the law or not. This trend of Feed the Rich while starving the Poor and Middle-Class is really getting old. Time for us to do something about it and soon. We have oil companies reading private emails about who complains about them, would it come as much of a shock if Big Insurance Companies are doing the same?
Aug 8, 2013 9:37PM
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So let me see, A teacher or manager or some other managerial position person that makes $60K  and thinks everyone around them at work or on the road should realize that they deserve more of everything including a break on their insurance.  Simply because their circumstances allowed them to finish college and obtain the position they now hold.

Even with an atrocious driving record. 

 

I had to struggle a bit more to earn my skills and keep my driving record clean. Yet it appears many believe that I should not qualify for better discounts.  Oh by the way I earned 6 figures last year and have for the past several years.  I don't struggle to get discounts, but I remember when I did.

 

As for insurance assuming risks well That's their business. From the looks of the buildings that harbor them and the bonuses the executives receive, I do not believe that they are in danger of bankruptcy.

 

The thing that offends me more than anything else is the assumption that anyone not fortunate enough to be highly successful will file a claim.  The arrogance of a bunch of duffusses should outrage every person that has insurance, even those with better rates than others.  Maybe your rates are still over priced.... Hmmm.

 

I Love America.  Even though we may disagree, we have that right.  I am fortunate, but I never look down upon anyone.  I'm thankful that someone runs that little store where I get my overpriced gas and the guy that cuts my grass.  The other millions of people that do jobs where the pay is less than stellar.  Some of those people had no choice, family sickness/death or financial breakdown in their home as young people and they had to go to work.  Their struggle reminds me how fortunate I am.

 

Those of you that think you are better than anyone else because of your circumstances, have just proven you are not.

 

Inspire, Encourage and always be a Beacon Of Hope to others.

Aug 8, 2013 6:18PM
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i guess in a nutshell all of the poor me stories lead to one conclusion, dont be poor cause it sucks

 

Jul 24, 2013 8:00AM
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Bull - it is based on claim history.  The lower the income, the higher the likelyhood of a policy holder filing a claim.  Someone making factory wages would have a hard time absorbing a repair on their own. 
Aug 8, 2013 6:17PM
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or if you are so dismayed by how insurance companies rate their customers, go start your own insurance company take all the risk and do it your way ,i have a sneaking suspiscion that in a very short period of time when your house and car and family is at risk for your decisions you will start to understand why they rate people the way they do.

 

Aug 8, 2013 6:15PM
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instead of whinning about how the man is keeping you down, try to become the man and reap the benefits, the feed the rich and starve the poor argument is so ridiculous it sickens me,if you dont want to be victimized by your income stay in scholl make better choices and work harder,stop thinking somebody owes you anything and go get all you can,but be preparred to make sacrafices like not hanging out with yor buddies at the bar and buying crap you dont need and cant afford,put some money int the bank to save and work your way to the top.i promise you the view is soooo much better up there and its there for the taking,just leave the kleenex and the poor abused me attitude at the bottom where it belongs.
Jul 24, 2013 3:46PM
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"...most Americans don't think education or income should play a role in insurance rate setting."

Not surprising, since most Americans aren't well-educated.  As a retired teacher, the total premium on my near-Cadillac, BCBS health insurance, including prescription, dental, and vision coverage is $620 per month.  The reason it's so cheap is because educated teachers take better care of themselves and incur less health costs.  The copay for all tests is $0 -colonoscopies, blood tests, 3-day heart stress tests, etc.- because BCBS knows most teachers learn from and take action from the tests and save BCBS more than they'd pay if the test was never done.

Similarly, well-educated people have better driving records.  I do agree that if you're a high-school dropout and haven't had an accident or ticket in 15 years you should get the best rates, but if you're going offer insurance to a young driver, statistics show you win by offering the better educated the lower rates.
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