Your job and education could determine your car insurance rate

I went online last week to get a car insurance quote from Mercury Insurance. I went through the process twice, once indicating my engineering profession.

All other information was the same – my age, address, driving record, make of car – but as an engineer I received a lower monthly rate: $247.88 instead of $262, $88 and a potential annual savings of $179.89.

My price comparison experiment was inspired by a petition filed on July 18 by Consumer Watchdog, a taxpayer and consumer advocacy group, protesting Mercury Insurance Co.’s request to the California Department of Insurance to raise its auto rates. .

Mercury Insurance, a major auto insurance provider in California, is asking to raise its rates on customers by 6.9%, or $131 million.

But a major factor underpinning Consumer Watchdog’s request for a public hearing on the proposal is its assertion that Mercury’s pricing is not only “excessive” but “unfairly discriminatory.”

“It’s a problem we’ve been fighting for many years to rectify in California, where insurance companies are illegally overcharging people based on arbitrary job categories,” Consumer Executive Director Carmen Balber told me. Watchdog.

In 1988, Californians passed Proposition 103, which required insurance rates to be based primarily on standards such as driver safety and experience rather than arbitrary discriminatory characteristics, such as employment status. , credit score, place of residence or gender. Rate increases and other rate setting factors must now be approved by the Department of Insurance.

The use of gender in pricing was officially banned in January 2019.

The ministry has never endorsed the use of education or occupation as a decisive measure on its own, but insurance companies have found a loophole by offering discounts for what they call ‘affinity groups’. “.

According to the company, these discount categories include employees of insurers and members of specific alumni or professional associations, but there are also broader group exclusions for, in Mercury’s case, government employees (s they hold administrative or technical positions), scientists (with at least a bachelor’s degree working in certain fields) or engineers.

“Companies are customers who pick the icing on the cake, and that causes discrimination in the auto insurance marketplace,” Balber said.

While educators and military service members also qualify for discounts, groups lean toward higher earners with more education.

Disparate impacts regardless of driver safety

The data confirms the consequences.

According to a 2019 analysis of insurance companies with “affinity groups” by the California Department of Insurance, three-quarters of people living in underserved communities fall into none of these special discount categories.

The report also found that outside of these groups, around 60% of customers pay 1.5% to 25.9% more for their car insurance premiums. They also tend to be in zip codes with lower income and education that have a higher percentage of people of color.

Other surveys and reports have found similar disparities in California and across the country.

It’s important to note that it’s no exaggeration how low-income and predominantly black and brown communities could be disadvantaged if rebates favored those with higher degrees and higher-paying skilled jobs.

Overall, black and Latino Californians are less likely to have a bachelor’s degree or higher and also earn less than their white counterparts.

Undocumented residents, who are most likely to work in low-paying jobs, are particularly excluded from these general benefits.

“Insurance companies in California are improperly using a person’s occupation and education to set auto insurance premiums,” wrote a group of nearly a dozen community and advocacy organizations. civil rights to Insurance Commissioner Ricardo Lara in the months leading up to the state investigation.

“Most glaring is that workers with regular jobs are paying higher car insurance premiums so doctors, engineers and other high-income earners can pay less.”

In its letter, the coalition noted that “Farmers Insurance charges a factory worker an annual premium 14.5% higher than that of an accountant or a doctor” and “Progressive Auto Insurance charges a office holder of a high school diploma an annual bonus 6.3% higher than that of an accountant or a doctor”. premium than the same driver with the same profession who has an undergraduate degree.

Unlike rating parameters based on factors such as safety which lower rates for everyone since there are fewer accidents and serious claims, occupation and education do not necessarily correlate with the risk of conduct.

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Justin D. O'Neill