Massachusetts bill aims to reduce auto premium disparity

A study from MoneyGeek found people living in ZIP codes with larger white populations often pay less for their car insurance.

Every insurer in the state that writes private passenger auto would be required to comply with these regulations within 60 days of the bill’s passage. (Credit: Shutterstock.com)

A bill sponsored by Massachusetts State Senator Pavel Payano aims to reduce “racial and socioeconomic inequities in auto insurance premium pricing” by altering how ZIP codes are weighed in underwriting.

If passed, the bill (S703) would disallow rating plans for private passenger motor vehicle insurance including territorial classifications from assigning a weight of more than 75% to individual territorial loss cost indication and no less than 25% to the state-wide average loss cost indication. Individual territorial loss cost and statewide average loss cost indication would need to be actuarially justified.

Every insurer in the state that writes private passenger auto would be required to comply with these regulations within 60 days of the bill’s passage.

MoneyGeek recently released the results of a study that looked at how auto insurance premiums correlate with race by examining data for 69 U.S. cities that each contain more than ten ZIP codes. The study found 75% of these cities had a negative correlation between the cost of auto premiums and the percentage of white residents who live within that ZIP code.

In other words: People living in cities with larger white populations often pay less for their car insurance.

Three of the cities with the largest negative correlation between white population and auto policy rates were New Orleans, Louisiana; Oakland, California; and Louisville, Kentucky. In New Orleans, the study found, for every 10% more white residents were in a ZIP code, insurance rates decreased by an average of $125. In Louisville, the difference is $87 less for every 10% increase in the white population, and in Oakland it is $74.

The study also found that in several of these cities, being in one of the least-white neighborhoods can affect a person’s auto premium by as much or more than having a speeding ticket on their record or having a lower credit score.

A separate Massachusetts House bill (H969) – this one sponsored by Representative Gerard Cassidy – looks to tackle this disparity, as well.

Cassidy’s bill aims to amend state law to include the language: “No insurance company, and no officer or agent thereof in its behalf, shall refuse to issue, renew or execute as surety a motor vehicle liability policy or bond, or any other insurance based on the ownership or operation of a motor vehicle because of age, sex, race, occupation, marital status, zip code, principal place of garaging of the vehicle, or geographical area.”

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