The largest U.S. auto insurers weigh occupation and education levels more than driving records to set rates for minimum-liability coverage, the Consumer Federation of America said today, citing a review of a dozen cities.
The group compared quotes from State Farm Mutual Automobile Insurance Co., Allstate Corp., Progressive Corp., Geico and Farmers Insurance for two fictional 30-year-old female drivers. One was a married executive with a master’s degree and a home who’d caused $800 in damage in an accident in the past three years. The other was a single receptionist with a high-school education who was renting and had a clean driving record.
Controlling for variables like zip code and car model, the group found that the executive got a lower quote in most cases than the receptionist, who had also been without coverage for 45 days. The findings show that companies are using discriminatory metrics in setting rates for coverage that is mandated in most states, the CFA said.
“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,” J. Robert Hunter, CFA’s director of insurance and former Texas insurance commissioner, said in a statement posted on the group’s website.
Geico, Progressive and Farmers quoted a higher rate to the receptionist in all 12 cities, the group said. In Baltimore, Allstate said it would cost the receptionist two-and-a-half times as much, or $3,292, to insure her car as the executive. The Northbrook, Illinois-based insurer charged lower rates in cities including Chicago, St. Louis and Phoenix.
Progressive works “to price each driver’s policy as accurately as possible” and uses multiple criteria, “which sometimes include non-driving factors that have proven to be predictive of a person’s likelihood of being involved in a crash,” Jeff Sibel, a spokesman for the Mayfield Village, Ohio-based company said in an e-mail.
State Farm, the largest U.S. auto insurer, was the outlier, giving the receptionist a lower rate than the executive in all twelve cities. The policyholder-owned insurer is based in Bloomington, Illinois.
Geico, a unit of Warren Buffett’s Berkshire Hathaway Inc., didn’t respond to a request for comment left on a media hotline. Laura Strykowski, an Allstate spokeswoman, State Farm’s Rachael Risinger and Farmers’ Jerry Davies had no immediate comment. Farmers has a management relationship with Switzerland’s Zurich Insurance Group AG.
The average annual price of auto insurance for U.S. drivers fell 3.3 percent to $791.22 in 2010 from four years earlier, the Insurance Information Institute said in a statement today, citing data compiled by the National Association of Insurance Commissioners. Competition among insurers helps lower prices for consumers, according to III, an industry trade group.
“Drivers should shop around if they feel as though their current auto insurer is not meeting their needs, or is charging too high a price,” Steven Weisbart, a senior vice president and chief economist at III, said in the statement.
The other cities studied were: Washington, Atlanta, Cleveland, Denver, Houston, Los Angeles, Seattle, and Tampa, Florida.