Car insurance premiums increase as income decreases

car insurance premiums breakdown

A new study revealed that the less a driver earns, the more he or she is likely to pay.

The Consumer Federation of America (CFA) recently conducted a study on car insurance premiums. They compared the rates paid by white collar drivers with those of blue collar drivers.

The research showed blue collar drivers pay a lot more than white collar drivers for auto insurance.

Moreover, the difference wasn’t small. The research discovered a massive difference between the two. Blue collar drivers pay an average of $681 more than white collar drivers in car insurance premiums. That figure is far from small.

“We believe the insurance companies are making lower-income drivers subsidize higher-income drivers,” said Doug Heller. Heller is a co-author of the study and a consumer advocate.

Insurers insist there is a clear, non-discriminatory reason for the difference in car insurance premiums.

car insurance premiums breakdown Dave Snyder is the vice president of policy at the Property Casualty Insurers Association of America (PCIAA). Snyder explained that the higher premiums are there for a solid and valid reason. “We’re not pricing on the basis of socioeconomics,” he said. “We’re pricing on the best information we can put together on the risk of loss.”

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The PCIAA’s member companies are responsible for underwriting 42 percent of the auto insurance policies sold in the United States. Geico’s perspective matches that of the PCIAA. Spokeswoman Christine Tasher said her company calculates its premiums on “actuarially justified costs.”

The CFA visited the websites of the five largest auto insurance companies in the United States to conduct the study. They used the websites to obtain quotes for hypothetical drivers living in fifteen American cities across the country. Car insurance premiums included only state minimum liability insurance limits. They did not include collision insurance.

The study compared the profiles of one male and one female driver. When income levels were changed but all other factors remained the same, premiums changed. The less a driver earned, the greater the premiums he or she had to pay. Moreover, the impact of low income occurred regardless of a good driving record. Blue collar drivers were quoted rates 59 percent higher than white collar workers who were equivalent in all other ways.

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