Study: Car insurance premiums higher for lower income drivers

Whether you do it every month, every six months or just once a year, the process of writing a check to your car insurance company can prove to be financially painful. According to a shocking new study, however, the process can actually prove to be significantly more painful for those with lower incomes.

Indeed, the non-profit consumer advocacy group Consumer Federation of America found that lower income drivers can pay anywhere from $600 to $900 more in annual premiums than higher income drivers despite having virtually identical driving records.

As part of the study, the CFA invented four “driver profiles” that it used to secure insurance quotes over the internet, including a lower income female, a lower income male, a higher income female and a higher income male. Here, the two lower income profiles and the two higher profile incomes had only a few minor differences.

To illustrate, the lower income female profile was a single 30-year-old bank teller with a high school diploma who rented an apartment. She drove a 2006 Toyota Camry, had been licensed for 14 years, and had been neither been in any accidents nor issued any traffic citations. She did, however, go without car insurance for the previous six months, as she didn’t own an automobile.

The higher income female was the same in many respects, including type of car driven and driving record, but she was married, had a master’s degree, was employed as a bank executive and no lapse in car insurance.

After seeking online quotes for these four profiles in 15 different cities from the nation’s five largest insurance companies, the CFA determined that the lower income drivers were quoted premiums an average of 59 percent higher — roughly $681 — than the higher income profiles. Furthermore, they were sometimes unable to secure a quote for the lower income profiles.

While the CFA called the findings “intolerable,” the Insurance Information Institute indicated that the other criteria — income, education, marital status, duration of coverage etc. — had to be taken into account given that most drivers have a clean record and they are generally predictive of losses. As for the inability to secure an online quote, the III indicated that this could be attributed to the requirement of some insurers to supply information like a Social Security number.

Regardless of how you choose to view this study, it’s a truly eye-opening look at just how significant of a role predictive analytics plays in the insurance industry.

If you have been involved in a car accident and the insurance company is failing to live up to its obligations under the policy, consider speaking with an experienced legal professional who can take the necessary steps to hold it accountable.