African-Americans paying higher auto insurance rates

Dina Gachman Nov 18, 2015

If you live in a predominantly African-American community, your auto insurance premiums could be more than double those of premiums found in predominantly white communities.

That’s just one of the findings that the Consumer Federation of America laid out in the newly released report. The CFA analyzed data from the five biggest auto insurance companies in most ZIP codes throughout the country. They also looked at average premiums in mostly African-American communities versus those in predominantly white communities, taking into account income and population density.

The report illuminates serious problems with auto insurance premiums that the CFA is urging legislators and regulators to address.

Among the findings: In communities where African-Americans make up over three quarters of the population, premiums average 70 percent higher than in communities with populations that are less than one quarter African-American ($1,060 vs. $622).

The report also states that the average premium in upper-middle income, mostly African-American ZIP codes is 194 percent higher than the average premium in a predominantly white, upper-middle income ZIP code ($2,113 vs. $717).

Every state except New Hampshire requires that residents have at least basic liability insurance. In states like Baltimore, New York, Louisville, Washington, DC, Detroit, Boston and Orlando, there is a gap of more than 50 percent between predominantly African-American and predominantly white ZIP codes when it comes to auto insurance premiums. The CFA says its analysis “does not imply that auto insurance companies deploy explicitly discriminatory practices,” and suggests that state insurance regulators should “more seriously address the impact of auto insurance pricing methods on people of color and lower-income drivers.”

J. Robert Hunter, Director of Insurance for CFA, said, “The pricing disparities for state mandated minimum auto insurance coverage quoted to drivers in primarily African-American communities are hard to fathom actuarially and look a lot like unfair discrimination.”

The CFA also suggests that the Federal Insurance Office (FIO) should look into the accessibility of state-mandated minimum liability coverage in low- and moderate-income communities and communities of color, and state lawmakers should work to enact needed reforms.

Instead of emphasizing things like ZIP codes, states could also create legislation that would place more importance on drivers’ safety records.

The CFA is asking legislators and regulators to look into the relationship between race and insurance rates, and will present its findings at a meeting of the National Association of Insurance Commissioners this week.

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