Some auto insurance companies quoted higher premiums to drivers with lower-paying jobs and less education, investigation shows
Drivers with less education and lower-paying jobs may end up paying more for auto insurance compared to consumers with identical driving records who have advanced degrees or job titles that come with higher pay, according to an investigation by Consumer Reports.
Consumer Reports found that Geico, Progressive, and Liberty Mutual quoted higher premiums, on average, to consumers who had less education. Geico and Progressive also quoted higher prices to consumers with service jobs compared to managers and executives.
“Drivers understand they’ll pay more for auto insurance if they’ve been in an accident or racked up a pile of speeding tickets,” said Kaveh Waddell, deputy editor for Consumer Reports’ Digital Lab.
But most people have no idea that they could be hit with a higher premium for having a service job or because they never went to college or left before graduating, Waddell said.
Insurance companies consider driving and non-driving factors when pricing automobile insurance policies. Driving factors include history of crashes and traffic violations, number of miles driven every year, and years of experience.
In addition to education and job title, non-driving factors can include age, gender, marital status, ZIP code, credit history, and whether you rent or own your home.
Consumer Reports requested 869 unique online auto insurance quotes from nine different insurers. It studied 21 ZIP codes in six states plus Washington, D.C.
Consumer Reports asked for quotes for a 30-year-old woman who owned a 2016 Toyota Camry LE and had a clean driving record, requesting her states’ minimum required coverage. The only details that Consumer Reports varied between requests were her education and occupation. The findings:
- Three companies provided preliminary quotes that were more expensive on average annually for consumers with less education: Liberty Mutual, $62; Geico, $115; and Progressive, $101.
- Two companies provided preliminary quotes that were more expensive on average annually for an applicant who was a cashier compared to an executive: Geico, $97, and Progressive, $31.
- Some quotes received by Consumer Reports were much higher. In Hoboken, New Jersey, Geico quoted a cashier without a high school degree an annual premium that was $455 higher than an identical driver with an executive job title and advanced degree.
- Five of the companies studied – Allstate, NJM, Plymouth Rock, State Farm, and Travelers – don’t ask potential customers about job or education levels. Farmers collects information about occupation, but its quotes didn’t vary substantially across job categories.
Consumer Reports’ investigation revealed that a poor credit score could add $500 to $2,000 or more to a driver’s annual premium compared with a consumer who had the same driving record and excellent credit.
“It is fundamentally unfair for auto insurers to penalize consumers with higher premiums based on factors that have nothing to do with their driving record,” said Chuck Bell, programs director for advocacy for Consumer Reports.
No one should have to pay a penny more for auto insurance just because they haven’t graduated from college or have a working class job, Bell said.
Consumer Reports opposes the use of non-driving factors for setting auto insurance rates because this practice can unfairly penalize consumers with higher premiums even though they have good driving records, he said.
The consumer organization urges state regulators to require insurers to base premiums mainly on factors that reflect the risk of insurance losses that consumers pose when driving. These include an individual’s driving record, miles driven, and years of driving experience.
Four states – California, Massachusetts, New York, and Michigan – currently prohibit the use of education and job level in auto insurance pricing. California, Hawaii, Massachusetts, and Michigan have banned the use of various types of credit information for auto insurance pricing.