New York proposes ban on discriminatory auto insurance rating factors

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Consumers Union praises plan to prohibit insurers from using a driver’s occupation and education level to set auto rates

May 16, 2017

YONKERS, NY:  Consumers Union, the policy and mobilization division of Consumer Reports, praised New York Governor Andrew Cuomo today for his proposal to prohibit auto insurance companies from basing premiums on a driver’s occupation or education level.

Research has shown that these non-driving rating factors can result in higher premiums for good drivers who work in lower paying jobs or did not attend college.  Under the proposal announced today, auto insurers would not be allowed to use these ratings factors unless they could demonstrate to the New York Superintendent of Financial Services that the use of these factors doesn’t result in unfairly discriminatory premiums.

“Paying for auto insurance can already be a major challenge for lower income drivers who are often struggling to make ends meet,” said Chuck Bell, policy analyst for Consumers Union.  “Good drivers shouldn’t be penalized with higher premiums just because they have a lower paying job or may not have gone to college.  This proposal will help limit discrimination and restore some fairness to the auto insurance market by making coverage more affordable for hard working New York families.”

In 2014, Consumers Union joined NYPIRG and New Yorkers for Responsible Lending in asking state regulators to investigate discriminatory auto insurance rates.  The use of non-driving factors has been found to have a disparate negative impact on minority drivers.

Consumers Union has long opposed the use of non-driving factors for setting auto insurance rates because of the discriminatory impact they can have on premiums.   Instead, Consumers Union has urged state insurance commissioners to require insurers to base their rates primarily on a policyholder’s driving record, miles driven, and years of driving experience.

An analysis by ProPublica and Consumer Reports found that drivers living in predominantly minority urban neighborhoods are charged higher automobile insurance premiums on average than drivers with similar safety records in non-minority neighborhoods with comparable levels of risk.  In some cases, insurers such as Allstate, Geico, and Liberty Mutual charged premiums that were on average 30 percent higher in minority zip codes than in comparable non-minority neighborhoods.

Consumer Reports and ProPublica found that households in predominantly minority zip codes spent more than twice as much of their household income on auto insurance (11 percent), compared with households in majority white neighborhoods (five percent), based on U.S. Census data and the ProPublica/CR analysis.  The U.S. Treasury Department has defined auto insurance as affordable if it cost less than two percent of household income.

Contact:  Michael McCauley, mmccauley@consumer.org, 415-902-9537 (cell) or 415-431-6747, ext 7606 (office)