The federation analyzed auto insurance premiums quoted on the Web sites of the five largest insurers (State Farm, Allstate, Geico, Progressive and Farmer’s) to price minimum liability coverage in five cities. Using an example of coverage for a 35-year-old woman with a good driving record, the study obtained quotes while varying characteristics like marital status, education level, occupation, home ownership and gaps in insurance coverage. Her driving record was the same in all instances.
The group found that in most cases, annual premiums were much lower if the woman was a married homeowner with a college degree, a professional job and continuous insurance coverage. In four of the examples, the premiums fell by at least 68 percent.
Premiums tended to be high if the woman was single, rented in a moderate-income area, had a high school degree, worked as a bank teller or clerical worker and had a gap in insurance coverage.
The analysis first obtained quotes for the “standard” example — a 35-year-old single bank teller with a high school degree and good credit record who rents a house in a moderate-income Zip code. The hypothetical woman had driven 15 years with no accidents or moving violations, and sought the minimum required liability coverage on a 2002 Honda Civic. Then, the researchers changed the criteria to see what the impact was on the quoted premium.
For instance, the “standard” quote of $2,696 from Progressive, for coverage in Baltimore, fell to $2,212 when the woman’s status was changed from single to married. And when all the criteria were changed to more a “favorable” status, the quote dropped to $718.
J. Robert Hunter, insurance director at the consumer federation, said a difference of nearly $2,000 based on non-driving factors is “patently unfair” and “actuarially unsound.”
Jeff Sibel, a spokesman for Progressive, said the insurer “works to price each driver’s policy as accurately as possible, so that every driver pays the appropriate amount based on his or her risk of having an accident.” He added: “To do this, we use many different rating factors, which sometimes include non-driving factors, that have been proven to be predictive of a person’s likelihood of being involved in a crash. Because different insurers use different information, which can cause rates to vary widely, we encourage consumers to shop around to find the combination of price and service that’s best for them.”
Alex Hageli, director of personal lines for the Property Casualty Insurers Association of America, disputed the federation’s position in an e-mail, saying that data have shown “consumers’ age, marital status, place of residence and occupation to be among the best predictors of future loss.” When such factors are “blended together” with criteria like driving experience, previous claims and vehicle age, he said, “these factors help to ensure that low-risk consumers can be better identified and pay less for insurance. In the final analysis, consumers benefit when insurance underwriting and rating decisions are based on a wide variety of fair and objective factors.”
Loretta Worters, spokeswoman for the Insurance Information Institute, an industry group, said in an e-mail, “What’s missing from the C.F.A.’s analysis is that every one of these factors that they attack is correlated, and highly correlated, with loss.”
Mr. Hunter of the consumer federation said his concern with using factors like occupation and education is that such factors are “surrogates” for criteria that states aren’t allowed to use in setting premiums, like income. At the very least, insurers should give less weight to non-driving factors in setting premiums, he said.
Los Angeles had the lowest quotes, he said, because California limits the use of non-driving factors in setting insurance rates. It is up to state insurance commissioners and legislatures to take action, he said, because auto insurance is regulated at the state level.
“We’re not trying to say get rid of these entirely,” he said. “We’re saying, you have to look at the combined effect and study these factors more carefully.”
Using non-driving factors drives up premiums, and forces many working families to drive without insurance, even though they risk paying fines or criminal charges for doing so. “Many low- and moderate-income citizens can’t afford required insurance because insurers use unfair rating factors,” he said.
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