A recent study suggests that they are, but the research report has been accused of producing flawed findings.
A new car insurance rates study has been published by ProPublica and Consumer Reports. It suggests urban neighborhoods populated primarily by minorities pay higher auto insurance premiums than comparable communities of lower minority populations.
However, an insurance industry group has accused the report’s findings of being flawed and misleading.
The study used car insurance rates data from California, Texas, Missouri and Illinois. The data was broken down by ZIP code and claims payments. The research was limited to those four states because they were the only ones from which regulators could produce the necessary information.
The report indicates that 33 of the 34 auto insurance companies selling in Illinois charged rates a minimum of 10 percent higher to ZIP codes where most residents were minorities when compared to rates charged in ZIP codes with smaller minority populations. In fact, of those insurers, six increased rates by 30 percent in those high minority ZIP codes.
In Texas and Missouri, higher car insurance rates were charged by more than half of auto insurers.
In those states, higher minority ZIP code residents were charged at least 10 percent more for auto insurance than their lower minority area counterparts.
That said, the situation was quite different in California. The insurance regulation is notably stricter in California than in Texas, Missouri and Illinois. As a result, said the report, only 8 companies were charging notably higher rates in ZIP codes with high minority populations.
Consumer Reports CEO and president, Marta Tellado, stated that discriminatory car insurance rates can be harmful to family budgets, can reduce community growth and can decrease employment opportunities. “Whether price disparities arise from bad actors or bad algorithms, the consequences are the same, and (Consumer Reports) is committed to ensuring transparency and fairness in pricing for people in all neighborhoods.”
However, the Insurance Information Institute (I.I.I.) trade group has accused the findings of being inaccurate. The I.I.I. hired an independent expert to conduct a review of the study data. James Lynch, the institute’s actuary, said the report’s analysis does not take into account factors outside of minority population which can also impact premiums paid within a given ZIP code.
One Thought to “Are car insurance rates higher in urban minority neighborhoods”
I recently sold car insurance. Independent agent. There are many more factors involved in this that have been completely ignored in the article. The individual’s credit rating is a large factor. The individual’s history with carrying and paying insurance on time is another. Also, not only crashes and crime in general in the neighborhood, but car thefts, number of small and large claims, even climate changes (more storms in a given area) are factored in. Yes, it’s a cyclical problem. The person can’t pay their insurance, get picked up for having no insurance, pay fines, drop their insurance, then pay a surcharge when they start it up again, and so on. I really really doubt it’s discrimination. Insurance companies can get into mucho trouble doing that, and there are active people in govt watching all sorts of things.