For state-mandated minimum-liability insurance, good drivers who live in moderate-income areas are being quoted higher prices for auto insurance, and rates vary widely across providers, according to research from the Consumer Federation of America (CFA). In one example, price quotes for the same hypothetical woman driver ranged from $762 to $3,390.

The research uses the websites of the four largest auto insurers: State Farm, Allstate, Progressive and GEICO. More than half (56 percent) of the rate quotes to two typical moderate-income drivers were more than $1,000, and nearly one-third of the quotes (32 percent) were more than $1,500.

"It is difficult to understand how insurers can justify charging more than $1,000 a year for minimum insurance coverage to drivers who have perfect driving records for many years," said Stephen Brobeck, CFA’s executive director. "It is also difficult to understand why the same driver is being quoted rates from different insurers that vary so considerably. Insurers say rates reflect risk and cost, but if this in fact is the case, why do their assessments of these factors differ so radically?"

The Insurance Information Institute offered a differing interpretation of the results.

“The answer is simple. The markets for auto insurance are highly competitive. In addition, the experience of insurers in these markets will differ, leading insurers to price the risk of a prospective policyholder differently,” said Dr. Robert Hartwig, economist and president of the I.I.I. “More importantly, increases in the cost of auto insurance nationwide remain in line with the Consumer Price Index (CPI), rising by less than 3 percent so far in 2012.”

The CFA Study

State Farm, Allstate, Progressive and GEICO have 48 percent of the auto insurance in the United States, and more than 60 percent in Florida, Maryland and the District of Columbia.

For the purposes of the study, CFA created two hypothetical consumers. Both had good credit ratings, were single with one dependent, rented in moderate-income areas, with median income of $30,000, had a high school degree, and owned a fully-paid-for 2002 Honda Civic, which they drove 10,000 miles a year. One was a 27-year-old male laborer with no accidents or moving violations in the past seven years; the other was a 35-year-old female bank teller with no accidents or moving violations for 12 years.

To ensure regional and size diversity, the survey included 15 cities: Boston MA, Washington DC, Baltimore, Md., Atlanta, Miami, Charleston W.V., Louisville, Ky., Chicago, Sioux Falls S.D., Denver, Houston, Phoenix, Las Vegas, Los Angeles, and Oakland, Calif.

In a statement to the press, the Insurance Information Institute pointed out that “Bodily injury and property damage related insurance claims payouts are generally higher in U.S. cities as compared to suburban and rural communities, an issue the CFA chose not to explore or explain.”

CFA's Observations

More than half (56 percent) of the quotes were more than $1,000, almost one-third (32 percent) were greater than $1,500. 

There were more quotes (4) that exceeded $3,000 than there were those under $500 (3).

While the male received slightly more expensive rates overall, all of the quoted rates exceeding $3,000 were to the woman.

Rates Quoted in 15 Cities Man Woman Both
$3000 and up 0 4 4
$2000-2999 8 5 13
$1500-1999 11 7 18
$1000-1499 12 13 25
$500-999 21 24 45
Under $500 1 2 3
No Quote 6 4 10
Insurance Not Available 1 1 2

 

There often are significant differences among rates quoted by the four insurers to either the man or the woman in the same city. In 13 of 30 instances (15 cities for both the man and the woman), this price range exceeds $1,000.

Rates Quoted to Man Progressive State Farm Allstate GEICO
Boston $2,058 NA NQ $2,290
Baltimore $2,152 NQ $2,020 $1,288
Washington DC $1,738 $1,335 $1,644 $1,352
Atlanta $1,334 NQ $1,430 $524
Miami $1,978 $2,430 NQ $1,759
Charleston $891 $961 $1,596 $620
Louisville $1,723 $1,482 $2,220 $1,760
Chicago $876 $1,582 $1,910 $637
Denver $795 NQ NQ $582
Houston $1,092 $1,999 $1,426 $760
Sioux Falls $718 $595 $624 $325
Phoenix $1,281 $1,390 $1,644 $610
Las Vegas $978 $1,462 $1,510 $780
Los Angeles $1,078 $2,278 $922 $841
Oakland $844 $2,049 $700 $681

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Rates Quoted to Woman Progressive State Farm Allstate GEICO
Boston $1,274 NA $1,740 $2,067
Baltimore $2,704 $1,801 NQ $804
Washington DC $1,260 $1,335 $1,622 $1,400
Atlanta $1,670 $921 $1,326 $448
Miami $2,822 $2,203 NQ $3,457
Charleston $951 $905 $1,714 $598
Louisville $2,130 $1,425 $3,354 $1,827
Chicago $832 $734 $1,806 $680
Denver $929 NQ $1,028 $575
Houston $1,242 $1,292 $1,388 $551
Sioux Falls $712 $553 $660 $318
Phoenix $1,449 $981 $3,458 $609
Las Vegas $1,160 $1,300 $3,390 $762
Los Angeles $800 $600 $676 $649
Oakland $638 NQ $500 $589

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"Given the fact that all states except New Hampshire require drivers to carry auto insurance, insurance commissioners have the responsibility to ensure that these drivers are charged fair, affordable rates,” said J. Robert Hunter, CFA's director of insurance and former Texas Insurance Commissioner. “Our research suggests that most rates charged moderate-income drivers are neither fair nor affordable."

CFA will send the results of its research to all state insurance commissioners and urge them to conduct their own research to determine whether low- and moderate-income drivers with good driving records, are being quoted prices that are high, unfair and unaffordable, which amounts to discrimination against lower-income and minority families. CFA also is pressing to prohibit the use of rating factors such as occupation and education.

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