Consumer Group Assails Auto Insurers For Pricing On Marital Status, Education, Occupation

The Consumer Federation of America, a national consumer group, said last week it surveyed auto-insurance customers and learned that they think it's unfair to price car coverage based on factors such as occupation, education level and marital status.

Looking for price quotes on insurance company websites, the group found that changing variables made a difference in annual premium of $3,446 for a potential GEICO customer in Miami, Fla., for example.


"Insurers are permitted to use factors such as education and occupation in setting prices even though these factors have nothing to do with driving and discriminate against lower-income drivers," said Stephen Brobeck, executive director of the consumer federation.

The group is mounting a campaign against auto insurers in an effort to change state insurance regulations. Regulations are set differently in each state by the state lawmakers and the heads of each state's insurance department.


The claim that insurers are discriminating was rebuked by a property-casualty trade group that said Brobeck is "flat wrong."

Auto insurers price coverage based on the risk of a particular customer, and that risk is based on dozens of factors to get the most accurate assessment, said Robert Hartwig, president of the Insurance Information Institute in New York.

Marital status, age, gender, education level, credit history and other factors are all strong indicators that correlate with the likelihood that an auto insurance customer will file an insurance claim, Hartwig said.

Insurance companies have gradually become more sophisticated in pricing auto insurance, and the car-coverage market has become more competitive as companies like Progressive, GEICO and Allstate compete aggressively with advertising. As a result, prices have generally declined on a national basis, and in Connecticut, too, according to state insurance regulators and the insurance institute.


The average premium paid per insured vehicle is at the lowest point in 18 years, if you adjust for inflation, Hartwig said. Even without adjusting for inflation, the premium paid per insured vehicle is less this year than in 2004, though premiums have increased steadily since 2009.

The Consumer Federation of America maintains that premiums "should largely reflect factors such as accidents, speeding tickets, and miles driven, over which drivers have some control and which directly affect insurer costs."

Auto insurance is regulated differently in each state and most states allow auto insurers to consider factors such as marital status, credit score, occupation, age, gender and dozens of other variables so long as the factors correlate to greater insurance risk.

"We do require that people submit the actuarial data to support what they're doing," said George Bradner, director of the property and casualty regulatory division at the Connecticut Insurance Department. "So, they just can't go ahead and just do something without having it reviewed by our actuary here and making sure that it's based on sound reasoning from an actuarial science perspective."

Connecticut has a very competitive marketplace with about 100 different companies offering auto insurance, Bradner said. The state has received very few complaints about basing auto premiums on a person's credit score and no complaints in recent memory about basing premiums on other factors, he said.

One stipulation in Connecticut law involving credit score: it can be used to base a premium for a new customer, but if the customer's credit score drops, the insurer is not allowed to raise renewal rates as a result of the drop in score, Bradner said. An insurer is allowed, however, to reduce renewal rates based on new credit scores.

Shopping For A Price

To prove its point, the consumer group searched the websites for Allstate, GEICO, Progressive, State Farm and other insurers — though not for either The Hartford or Travelers — to see what rates the companies would charge.


The consumer group started off using the following to get price quotes: coverage for a 30-year-old single bank teller with a high-school degree and a good credit record. The sample woman rents a home in a moderate-income zip code and has driven for 15 years with no crashes or moving violations. The search was for required liability coverage — no collision or comprehensive — on a 2002 Honda Civic and previous coverage lapsed 15 days before.

The group then changed the application to see how the annual premium would be affected if the woman were married, a homeowner, a college graduate, an executive or professional, a person with no lapsed coverage, living in an upper income zip code and other factors.

The CFA looked for rates in Baltimore, Miami, Louisville, Houston and Los Angeles.

The biggest differences in price were: a 73 percent change from $2,696 to $718 for Progressive coverage in Baltimore, Md., and an 86 percent change from $4,024 to $578 for GEICO coverage in Miami, Fla.

In response to the results, GEICO spokeswoman, Christine Tasher, said in a prepared statement, "In states where this issue was previously raised, companies provided information about the factors used to underwrite insurance risks. State insurance regulators have thoroughly reviewed the use of these factors and they were shown to be credible and actuarially justified."

A Progressive spokesman, Jeff Sibel, said, "Progressive 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. 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."