Car Insurance Rates Are Higher Based on Education, Report Says
People may be paying higher auto insurance rates if they didn’t go to college or work blue-collar jobs, according to a new report from the Consumer Federation of America (CFA)
The CFA found major auto insurance companies like GEICO, Farmers, Liberty Mutual, and Progressive charge higher rates from drivers who only have a high school diploma or a lower-status job.
Liberty Mutual, for example, charges a high school graduate 10 to 13 percent more that a college graduate, according to the report.
Companies must be doing this for a reason, but the CFA doesn’t offer any. It is unclear how education and occupation affects the level of risk involved when driving a car. Do people with less education or lower-level jobs get into more accidents? If that’s the case, then why don’t other companies like Travelers, USAA, State Farm, and Allstate use education or work status to calculate their rates? There could be a trade-off, like taking into consideration claim history, credit score, and whether the company also insures your house, business, etc., instead.
A 2012 survey showed the majority of American consumers believes using occupation or education to set rates is unfair.
CFA says it is working to stop the discriminatory factors used in calculating auto insurance premiums. The group seems to assert that giving auto quotes based on occupation is akin to a quote based on race.
“The American public knows that it is unfair for auto insurers to use factors like education and occupation in setting rates,” said J. Robert Hunter, CFA’s Director of Insurance, a former Texas Insurance Commissioner and former Federal Insurance Administrator. “In effect, auto insurers are discriminating on the basis of income and race. States should prohibit the use of these demographic factors that bear no logical relation to insurer risk.”