A new study from the Consumer Federation of America (CFA), a consumer advocacy group, suggests that auto insurance is too expensive for the poorest Americans to afford. CFA claims that this is to bias seen in the insurance industry despite the fact that insurers cannot base prices solely on a person’s income. In most states, however, insurers can use socio-economic information to price policies, which directly correlates to income. This could be a major problem in states in which auto insurance is mandatory for all drivers.
The study shows that, in some states, drivers are required to pay at least $1,000 a year for auto insurance. Most of these policies are basic liability coverage, which is of little use to low income drivers. The study also argues that the number of miles driven by an individual is adding to the imbalances in the insurance industry. The CFA believe that something must be done to provide low income drivers with protection against the insurance industry and the group is now pressuring lawmakers to take action.
The insurance industry is decrying the study, claiming that it does not account for several factors that contribute to the overall price of insurance coverage. One problem insurers are having with the study is that it targets only them. Insurers suggest that automakers are also at fault for manufacturing expensive vehicles that, at time, are not entirely safe to drive.
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