The Consumer Federation of America (CFA) warned on Monday (PDF) that auto insurance customers without college degrees or high-ranking jobs may be paying too much, subject to a unique form of “discrimination” that it says a handful of major national insurers regularly employ.
The CFA was able to determine which insurers were using educational discrimination by creating two identical fake customers and separating them only by education level and career advancement. Both had the same driving records and both lived in the same areas, or so they told insurers.
GEICO, Farmers, American Family, Liberty Mutual and Progressive all offered different quotes based upon the information provided, and four of the five offered pricier quotes for the hypothetical customer who did not graduate from college. The fifth, Liberty Mutual, refused outright to offer a quote to non-grads in five major cities.
“The American public knows that it is unfair for auto insurers to use factors like education and occupation in setting rates,” J. Robert Hunter, CFA’s Director of Insurance, said in an advisory. “In effect, auto insurers are discriminating on the basis of income and race. States should prohibit the use of these demographic factors that bear no logical relation to insurer risk.”
However, it’s not all bad news for consumers: The CFA also found that State Farm, Allstate, USAA, Nationwide and Travelers do not use occupation or education level to weight their policy premiums.
“We commend auto insurers who are not using education and occupation in their ratemaking,” a CFA spokesperson added. “One reason insurance commissioners should address this issue is because these insurers may well feel pressured to adopt the discriminatory practices of GEICO and Progressive.”
[“Stock photo: A woman in a car gives the middle finger,” via Shutterstock.]
(H/T: NBC News)