The Man’s Got A Surefire System– An Economic Prison

Posted on January 30, 2013 by reflectionephemeral

Seems to me this practice reflects a larger problem in our country. From Time:

In its new study of car insurance rates, the Consumer Federation of America reports that lower-income people pay higher premiums, even if their driving is better than that of their rich neighbors.

The report, which is the CFA’s third on car insurance premiums, features a mystery-shopping experiment conducted over 12 cities with the nation’s five biggest insurers. Rates were requested for two hypothetical customers: one with a master’s degree and an executive job, the other a receptionist with a high school education. Two-thirds of the time, the wealthy executive was offered a better rate than the middle-class customer — even though the “executive” had caused a car crash and the “receptionist” had a clean driving record.

The new study builds on the premise established by previous CFA reports: Poor people are charged higher rates for car insurance. Insurance companies say there are legitimate reasons why this is so. Yet when the watchdog group dug deeper, it found that this discrepancy couldn’t be explained away by the fact that people with lower incomes might live in areas where they’d be more at risk of a break-in, do more driving than their wealthier counterparts, or even have lower credit scores. …

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  • http://www.tarheelred.com/ Pino

    Seems to me this practice reflects a larger problem in our country. From Time:

    From Time:

    “In every case Farmers, GEICO, and Progressive quoted the safe driver a
    higher premium than the driver causing an accident,” the report says, or
    it refused to offer them a quote entirely. “On the other hand, in all
    12 cities State Farm charged the good driver less.”

    It would seem that State Farm would be eating GEICO, Farmers and Progressive’s lunch.

    • vicomtepicabia

      http://www.carinsurancecompanies.net/top-10-car-insurance-companies-by-market-share/
      This says State Farm has more market share than those other 3 individually, though less than them combined, but its revenue is lower than any of them and its employee count much greater. (BTW, this is the sort of thing you might have looked up yourself.) Do these facts contradict or support whatever you were trying to imply?

      • http://www.tarheelred.com/ Pino

        BTW, this is the sort of thing you might have looked up yourself.

        Or, ya know, Time.

        Do these facts contradict or support whatever you were trying to imply?

        Neither. They provide next to no useful information.

        How much of the revenues of each are directly attributed to individual auto insurance? How many employees are involved in individual auto insurance and all kinds of other things that would provide input into the profit equation.

        The larger point is that it is hard to believe that companies are both greedy and guilty of discrimination. If a company is greedy they will not willingly turn away customers. It’s the same argument used when people claim women earn less than men. What profit driven company would really hire equally qualified people at a 23% point premium when they could retain the same services at 72 cents on the dollar?

        However, an interesting quote from the study:

        “Policymakers should ask why auto insurers are permitted to discriminate on the basis of non-driving-related factors such as occupation or education,” he added.

        Do they mean other than things like age, marital status and sex?

        Ahh yes, back to the study:

        It compared premiums quoted to two 30-year old women who each had driven for 10 years, lived on the same street in the same middle-income zip code, and sought minimum liability coverage required by that state. But these two women differed in several important respects: One was a single receptionist with a high school education who rents, has been without insurance coverage 45 days, and has never had an accident or moving violation. And the other woman was a married executive with a Masters degree who owns a home, has had continuous insurance coverage, and has had an at-fault accident with $800 of damage within the past three years.

        Ok. Now it makes more sense. The Time reporting is sloppy.

        They make it sound like the ONLY delta was income and occupation when in fact there are a whole host of differences.

        Single vs Married

        Home owner vs Renter

        Lapse of coverage vs Continuous

        Masters Degree vs High School only

        If the magazine was really interested proving income as the culprit then they should have isolated on income alone.