Auto Insurance

California Prohibits Auto Insurance Companies From Considering Gender When Setting Prices

Other States Should Follow Suit to End Unfair Overcharging of Women Drivers, Consumer Groups Say

Washington D.C. The Consumer Federation of America (CFA) and the Consumer Federation of California (CFC) applauded outgoing California Insurance Commissioner Dave Jones for adopting regulations that eliminate the use of gender in auto insurance pricing in California. The groups said that policymakers and regulators around the country should take similar steps in their states in order to end the discriminatory practice that has allowed insurers to charge women with good driving records more, on average, than men with similar driving records.

“Eliminating gender from auto insurance pricing is consistent with the idea that our premiums should reflect how we drive rather than who we are,” said Douglas Heller, an insurance expert who provided testimony to the Department of Insurance in support of the rule changes on behalf of CFA and CFC’s Education Foundation.

The rules, which took effect on January 1, 2019, will lower premiums charged to women in California, who, like women across the country, pay more than men for auto insurance, despite widespread misconceptions to the contrary. According to a 2017 national survey conducted for Consumer Federation of America by ORC International, a significant plurality of Americans think women pay less for coverage than men. However, separate research in recent years by the California Department of Insurance, Consumer Federation of America, Texas Appleseed, and the Michigan Coalition Protecting Auto No-Fault demonstrate that women, especially those over 25 years old, pay more for auto insurance.

Currently, six other states also prohibit gender discrimination in auto insurance rating – including Hawaii, Massachusetts, Michigan (though there are exceptions for a significant portion of this market), Montana, North Carolina, and Pennsylvania.

“Our research over the years has uncovered a variety of discriminatory pricing strategies by auto insurance companies, but when we found that insurers had begun charging women more, that really surprised me, especially because the gender-based pricing was so erratic,” said J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner.  “Given the odd and unfair prices we see in the market, gender should be banned across the country as not determinative of risk and, like race, gender should not be used in pricing auto insurance.”

The rules will also eliminate the pricing problem faced by transgender drivers who, under a new California law, can have their gender identified as “non-binary” on California drivers licenses as of January 1.

“We have been working on a case by case basis in California to limit the unfair use of gender in pricing by challenging insurance companies’ rating plans, and we are glad that Commissioner Jones recognized the injustice of gender-based pricing so that the entire market will be fairer for good drivers, regardless of their gender identity,” said Richard Holober, Executive Director of Consumer Federation of California.

The consumer groups said that virtually every state prohibits unfair discrimination in auto insurance pricing, which means that every state insurance commissioner could follow the lead of Commissioner Jones and issue rules prohibiting the use of gender in pricing.

Contact: Doug Heller, 310-480-4170; Richard Eckman, 202-939-1013