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Survey Calls Car Insurance Math Unfair

Drivers and insurance companies have very different ideas about what should determine auto insurance rates, a new survey from the Consumer Federation of America (CFA) finds.

A majority of the 1,010 people surveyed told the nonprofit consumer watchdog they believed their rates should be based on specific driving behaviors and history. Insurance companies currently use a variety of non-driving factors such as credit history and ZIP code to set rates.  All states except New Hampshire require car owners to buy some kind of insurance or proof of financial responsibility.

Percentage rating each insurance factor as “very fair” or “somewhat fair:”

87%        Traffic accidents caused               

85%        Moving violations such as speeding tickets

74%        Number of years with a license

66%        Age

61%        Miles driven

45%        Location of residence

33%        Occupation

32%        No previous insurance because no car

31%        Level of education

31%        Credit score

30%        Gender

“Insurers are permitted to use factors such as education and occupation in setting prices even though these factors have nothing to do with driving and discriminate against lower-income drivers,” says Stephen Brobeck, spokesperson for the CFA.  “Premiums should largely reflect factors such as accidents, speeding tickets, and miles driven, over which drivers have some control and which directly affect insurer costs.”

The insurance industry, in response, says the ability to more precisely measure risk lowers rates for good drivers.

“Consumers have never had more options in terms of the number of insurers competing for their business, offering them an unprecedented ability to compare prices, shop and save,” says Robert Hartwig, president of the Insurance Information Institute (III).

III data show average car insurance expenditures at an inflation-adjusted 20-year low.

Insurance companies are not alone in looking at non-driving history. Almost all states will revoke a driver's license for reasons that have nothing to do with driving. (See “ 59 ways to lose your license -- without a ticket.”)

The poverty penalty

Some of those non-driving factors can have a huge effect on rates.

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