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Safer drivers don't always pay less

A new study finds that you may pay more for car insurance than someone who earns more money than you, even if you're accident-free.

By MSN Money Partner Feb 12, 2013 12:08PM

This post comes from Des Toups at partner site logoA consumer watchdog group says a high school graduate with a blemish-free driving record will pay more for car insurance than a college-educated counterpart with a recent accident.


Image: Businessman talking on his cell phone by a car accident © Stewart Cohen, Blend Images, Getty ImagesThe Consumer Federation of America compared rates from five car insurance carriers for two women, both 30 years old and living on the same street. But one driver was single, had a high school education and rented a home. The other was married, had a master's degree and owned a home.


Each driver carried a black mark: The lower-income driver had a lapse in coverage of 45 days, and the higher-income driver had an at-fault accident with $800 in damage.


The CFA found (.pdf file) that the safer driver -- the one with no accidents on her record -- would pay more for liability insurance in the majority of comparisons it ran for 12 cities. In most cases, the difference was at least 25%.


"State insurance regulators should require auto insurers to explain why they believe factors such as education and income are better predictors of losses than are at-fault accidents," said J. Robert Hunter, spokesperson for the CFA and a former Texas insurance commissioner.


Insurance companies often offer lower rates or outright discounts to drivers who are married, own a home or work in a particular occupation. consumer analyst Penny Gusner notes that a lapse in coverage carries much more weight than a relatively minor accident. The $800 tally for the better-educated driver's accident is low enough to fall below many insurers' threshold for a rate increase, she says, but "a lapse in coverage is a big no-no."


There may be benign reasons for a gap, such as a military deployment, she says, but insurers tend to look at the dark side. "If you don't have insurance, it usually means you were canceled for nonpayment or non-renewed because your driving record took a nasty turn."

The CFA report also took the insurers -- Allstate, Farmers, GEICO, Progressive and State Farm -- to task for the huge variance in rates between cities. Allstate, for example, would charge the same driver $850 in St. Louis but $3,292 in Baltimore.


A study last year found an even greater disparity, with the same driver paying as little as $730 for full coverage in Bullhead City, Ariz., and $4,214 in Highland Park, Mich. (You can see how rates for full coverage vary around the country with the site's Nosy Neighbor tool.)


In 35 of the 60 cases studied, the insurers either quoted annual premiums in excess of $1,000 for the accident-free driver or refused to quote a price.


"Unfortunately, the discriminatory practices of auto insurers mainly harm low- and moderate-income drivers," says Stephen Brobeck, CFA executive director.


The group praised State Farm for offering lower rates to the safer driver every time. "If they can be a successful company without using highly discriminatory factors, other large companies should be able to do so as well," says CFA's Hunter.


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Feb 12, 2013 2:28PM
BS.  I have a perfect driving record, for YEARS 25+, and only have lapsed in coverage for the times I chose to not own a car.  Penalized every time for taking the bus.  Go figure.
Feb 12, 2013 3:31PM
"highly discriminatory" wow! Really???
Feb 12, 2013 3:33PM
The good drivers always end up paying more to cover the costs of the lousy drivers.  Even after years of a clean driving record and no accidents mine continues to climb due to numerous claims against my insurer by BAD drivers.  
Feb 12, 2013 3:18PM
I believe auto insurance the way it is set up is a big rip off. They are taking your money believing you will have an accident & you are paying them money believing you wont. So for the safe driver who has not had an "accident" in several years, who has a fender bender that may cause $1000.00 to repair with a typical $500.00 deductible will probably decide to pay the full cause themselves so that there insurance rate won't go up. Nine times out of ten it will probably go up. On the other hand you are depending on all that you put in to paying your premium will cover you if there is major damages. I had a vehicle that was still under factory warranty with full coverage insurance. The vehicle was about 15 months old with 15,500 miles on it. I had just left an authorized dealer for brake maintenance. I drove the vehicle maybe 5 miles and it caught on fire under the hood. When the fire dept. got the fire out and opened the hood they showed me a shop rag that was left under the master cylinder. After seeing that I wondered  what else the shop did wrong. Insurance company determined that the cause was a ruptured AC line. The vehicle manufacturer said the refrigerant they used was not flammable. I really did not care. I figured between the manufacturer, the authorized dealer and the insurance company that somehow I would get a replacement vehicle. That did not happen. All the insurance company offered to do was pay off the remaining loan on the vehicle and I received just shy of $3200.00. That was better than nothing but I felt like I was ripped off because the manufacturer did a recall for under hood fires but excluded the engine that was in my vehicle and the insurance company was not interested in going to battle for me. Go figure.
Feb 12, 2013 4:07PM

I don't know what their talking about. State Farm is the worst, worst, worst. Absolute worst. I've been in 3 accidents that were all the other drivers fault. Every time I called State Farm to report the agent asked me who was at fault, when I tell them the other guy they tell me to call their insurance company and hang up on me. After 20 years or paying what I thought were unusually high premiums with no explanation I found out they had someone else's license number on my policy. After correcting this error they added a surcharge to my policy to keep the premium at the higher rate.

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