Auto Insurance

Major Auto Insurers Charge Good Drivers 70% More in African American ZIP Codes than in White ZIPs

CFA urges regulators and insurers to take action to address findings

Washington, D.C. – Good drivers living in predominantly African American ZIP codes are charged significantly higher premiums than similar drivers in largely white communities, even after accounting for population density and income levels, according to a report released today.  The Consumer Federation of America reviewed quotes from the five largest insurers by ZIP code and found that, on average, predominantly African American communities are quoted premiums that are 70 percent higher than similarly situated drivers in predominantly white communities ($1,060 vs. $622).

The report is available here:

“These findings suggest a troubling pattern of high rates in African American communities regardless of driver history,” said Tom Feltner, Director of Financial Services at the Consumer Federation of America.  “We are not rushing to judgment about why this happens, but it is urgent that regulators, lawmakers, and the industry take a hard look at these findings and address the impact of high auto insurance prices on drivers living in predominantly African American communities.”

The report also found that:

  • In the densest urban centers, the average premium in predominantly African American ZIP codes is 60 percent higher than the average premium in equally dense predominantly white urban ZIP codes ($1,797 vs. $1,126).
  • In rural ZIP codes, the average premium in predominantly African American ZIP codes is 24 percent more than the average premium in rural, predominantly white ZIP codes ($669 vs. $542).
  • The average premium in upper middle income, predominantly African American ZIP codes is 194 percent higher than the average premium charged to a similarly situated driver in an upper middle income, predominantly white ZIP code ($2,113 vs. $717).
  • Across the country, Progressive’s and Farmers Insurance’s good driver premiums show the most disparity between predominantly African American and predominantly white ZIP codes, with both companies averaging 92 percent. State Farm, Allstate and GEICO also charge substantially more—62, 56, and 52 percent respectively.
  • In several metropolitan regions around the country, including Baltimore, New York, Louisville, Washington, Detroit, Boston, and Orlando, the disparity of premiums is more than 50 percent between predominantly African American and predominantly white ZIP codes.

For the past several years, CFA has studied the challenges faced by low- and moderate-income Americans who need their car but face expensive mandatory auto insurance premiums.  CFA’s prior research has shown that blue-collar workers, drivers with lower levels of educational attainment, and drivers with low credit scores pay considerably higher premiums for these basic policies.  With this new research, CFA finds that even when controlling for socio-economic factors and population density, drivers who live in African American communities pay much more for the most basic liability-only policies.  CFA did not research differences in premiums charged for comprehensive and collision coverage required for any driver whose car is financed.

Data used in this report were acquired from Quadrant Information Services and contain annual premiums each insurer would charge a 30 year-old woman with a perfect driving record, who rents her home, works at a clerical job and has a fair credit score.

Since laws in all states except New Hampshire mandate that drivers purchase at least a basic liability insurance policy that covers accidents caused by the driver, any evidence that certain communities face steeply higher premiums demands investigation and explanation.

“In addition to mandating the purchase of auto insurance, virtually every state has laws forbidding unfair discrimination,” said J. Robert Hunter, Director of Insurance for CFA, who is also an actuary and the former Insurance Commissioner of Texas.  “The pricing disparities for state mandated minimum auto insurance coverage quoted to drivers in primarily African American communities are hard to fathom actuarially and look a lot like unfair discrimination.”

CFA will present these findings along with other research on auto insurance pricing to a meeting of the National Association of Insurance Commissioners on Thursday November 19, 2015 and is calling on regulators and legislators to conduct further investigation into the relationship between insurance rates and race.

Contact: Tom Feltner, CFA, 202-618-0310; Robert Hunter, CFA, 703-528-0062

The Consumer Federation of America is a national organization of more than 250 nonprofit consumer groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.