Good drivers who live in predominantly black neighborhoods are being charged significantly higher premiums than similar drivers in white neighborhoods, even after accounting for population density and income levels, according to a report released last week from the Washington, D.C.-based Consumer Federation of America.
The nonprofit consumer advocacy group reviewed quotes by ZIP code from the five largest Auto insurers — Allstate, Farmers Insurance, Geico, Progressive and State Farm — and found that on average customers in black neighborhoods are quoted premiums that are 70% higher that drivers in white neighborhoods — $1,060 vs. $622.
"These findings suggest a troubling pattern of high rates in African American communities regardless of driver history," said Tom Feltner, director of financial services at the Consumer Federation of America, in a news release. "We are not rushing to judgment about why this happens, but it is urgent that regulators, lawmakers, and the industry take a hard look at these findings and address the impact of high Auto insurance prices on drivers living in predominantly African American communities."
The organization's report also found that:
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In the densest urban centers, the average premium in predominantly black ZIP codes is 60% higher than the average premium in equally dense predominantly white ZIP codes — $1,797 vs. $1,126.
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In rural ZIP codes, the average premium in predominantly black ZIP codes is 24% more than the average premium in white ZIP codes — $669 vs. $542.
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The average premium in upper middle income, predominantly black ZIP codes is 194% higher than the average premium charged to a similarly situated driver in an upper middle income, predominantly white ZIP code — $2,113 vs. $717.
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Across the country, Progressive's and Farmers Insurance's good driver premiums show the most disparity between predominantly black and predominantly white ZIP codes, with both companies averaging 92%. State Farm, Allstate and Geico also charge substantially more — 62%, 56% and 52% respectively.
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In several metropolitan regions around the country, including Baltimore, New York, Louisville, Washington, Detroit, Boston, and Orlando, the disparity of premiums is more than 50% between predominantly black and predominantly white ZIP codes.
The Consumer Federation said data used in the report was acquired from Quadrant Information Services and contains annual premiums each insurer would charge a 30 year-old woman with a perfect driving record, who rents her home, works at a clerical job and has a fair credit score.
"In addition to mandating the purchase of Auto insurance, virtually every state has laws forbidding unfair discrimination," said J. Robert Hunter, Director of Insurance for CFA, who is also an actuary and the former Insurance Commissioner of Texas. "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."
I.I.I. disputes findings
The New York City-based Insurance Information Institute, however, disputes the report's findings.
Steven Weisbart, senior vice president and chief economist for the insurance industry-funded think tank, told the Baltimore Sun that he didn't think the Consumer Federation's analysis was statistically sound. Any disparity would be based on other factors insurers examine, such as credit score or number of accidents in an area, he told the newspaper.
"When insurance companies price their policies, they don't even know who's black and whose not," said Weisbart. "So they couldn't, even if they wanted to, charge higher rates for African-American policy holders. It would be something that would arise out of the other factors."
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