Use of rating factors causing “safe” drivers in U.S. to pay more: consumer group

A 12-city examination involving the five largest auto insurers in the United States indicates that use of rating factors results in insurers frequently charging higher premiums to “safe” drivers than to those who have had an at-fault accident within the last three years, the Consumer Federation of America (CFA) reports.

In two-thirds of the 60 cases studied, large auto insurers quoted higher premiums to “good drivers” than to those responsible for an accident, notes the CFA’s third report on auto insurance premiums charged by the largest auto insurers, released Jan. 28. The higher prices mainly reflect insurer use of rating factors such as education and occupation, argues the CFA, established in 1968 to advance the consumer interest through research, advocacy and education.

In more than three-fifths of the cases with these higher premiums, the CFA statement notes, the premium quoted the safe driver exceeded that of the unsafe driver by 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,” charges J. Robert Hunter, CFA’s director of insurance, formerly the insurance commissioner in Texas.

CFA priced policies in 12 cities – Baltimore, Washington, D.C., Atlanta, Tampa, Cleveland, Chicago, St. Louis, Denver, Houston, Phoenix, Los Angeles and Seattle – using the websites of the five largest auto insurers in the U.S., namely State Farm, Allstate, GEICO, Farmers and Progressive. Together, notes the CFA, those insurers have more than half of the private auto insurance market.

The federation compared premiums quoted to two 30-year-old women who each had driven for 10 years, lived on the same street in the same middle-income zip code, and sought minimum liability coverage required by the state in question. The two women, however, did differ: one was a single receptionist with a high school education who rents, has been without insurance coverage 45 days and has never had an accident or moving violation; the other is a married executive with a Masters degree who owns a home, has had continuous insurance coverage, and has had an at-fault accident with $800 of damage within the past three years.

In 35 of the 60 cases, the CFA reports the insurers either quoted annual premiums in excess of $1,000 or declined to quote a price. In only four cases did insurers quote an annual premium of less than $500, the federation adds.

The analysis shows not all insurers were the same. In every case, Farmers, GEICO and Progressive quoted the safe driver a higher premium than the driver causing an accident, the CFA statement notes. (In several cases, companies refused a quote to the good driver, but gave one to the accident-causer.)

A chart from CFA indicates the following: Allstate’s annual premiums for the no-accident driver ranged from $850 in St. Louis ($832 in Los Angeles, which has state-run insurance) to $3,292 in Baltimore, while Progressive’s annual premiums ranged from $864 in Cleveland ($790 in Los Angeles) to $1,928 in Baltimore, and State Farm’s annual premium ranged from $310 in Chicago to $1,792 in Tampa.

In all 12 cities, State Farm charged the good driver less. Rates quoted in all cities were either the lowest (six cities) or the second lowest (six cities), the CFA adds.

“With nearly one-quarter of the private passenger auto insurance business, State Farm dominates the market. If they can be a successful company without using highly discriminatory factors, other large companies should be able to do so as well,” Hunter contends.