Baltimore, M.D. — The nonprofits Maryland Consumers Rights Coalition (MCRC) and the Consumer Federation of America (CFA) have released a new report illustrating today’s version of redlining in Maryland: The use of zip codes – instead of driving records – to set auto insurance premiums. The report reveals the extraordinary price disparities faced by safe drivers in communities of color compared with those in predominantly white communities, even by people with pristine driving records. HB1251/SB805, sponsored by Del. Alonzo Washington (D-22) and Sen. Douglas J.J. Peters (D-23), will correct these inequities. SB805 will be heard by the Senate Finance Committee on March 3.

In Maryland, auto insurance companies are not allowed to use race or income to set premiums; however, auto insurers can use a number of non-driving rating factors that are proxies for race and income. A driver’s home zip code is used as a primary factor in setting an individual’s insurance premium. Auto insurance is required in Maryland but not always affordable for lower-income workers – many from communities of color – who need cars to get to higher-paying jobs. Some risk driving with no insurance because it’s unaffordable. The outcome of zip code pricing in Maryland is that people of color consistently pay significantly higher premiums for the coverage mandated by state law.

The Consumer Federation of America recently acquired data from Quadrant Information Services, LLC that includes auto insurance premiums in every Maryland zip code from 10 of the largest insurance carriers in the state, representing almost 90% of the market. The premiums in the dataset reflect the cost of a policy covering only the state’s mandatory coverages for a customer with no accidents, tickets, or claims on their driving record. The report findings show:

• Drivers pay dramatically different rates for auto insurance based on their zip code
• Zip codes with a majority African American population pay significantly higher premiums compared to zip codes where the majority of the population is white

Auto Insurance Rate Comparisons by Zip Code – Three Examples:

Baltimore City 21216 Greater Mondawmin vs 21211 Hampden/Remington/ Medfield (two miles apart): 

• • Greater Mondawmin is comprised of 95% African American residents with a median household income of $40,178
  • Hampden/Remington/Medfield is comprised of 11% African American residents with a median household income of $58,210
  • Drivers in Greater Mondawmin pay an average of $2,424 for auto insurance.
  • Drivers in Hampden/Remington/Medfield pay an average of $1,717 for auto insurance
  • That’s $700 more for auto insurance in Greater Mondawmin (a majority African American community) = 70% surcharge for drivers living just two miles west of Hampden/Remington/Medfield

Pimlico 21215 & Mount Washington 21209 (two miles apart or across the street from one another):

• • While there are two miles that separate the community, in some areas, there is simply a street. One street difference means a 36% increase in auto insurance rates
  • Pimlico is a community that is 79% African-American with a median household income of $38,651
  • Adjacent to Pimlico lies Mount Washington, a community that is 69% white with a median household income of $83,202
  • Mirroring our other findings, drivers in Mount Washington pay an average premium of $1745, while their neighbors in Pimlico pay $2,367 – a $621.88 increase

Prince George’s County 20743 Fairmount Heights vs 20740 College Park (eight miles apart):

• • Fairmount Heights is comprised of 95% People of Color (85% African American, 10% Hispanic) with a median household income of $64,141
  • College Park is comprised of 41% People of Color (21% African American, 20% Hispanic) with a median household income of $66,679
  • Drivers in Fairmount Heights pay an average of $1576 for auto insurance
  • Drivers in College Park pay an average of $1302 for auto insurance
  • That’s $274 more for auto insurance in Fairmount Heights (a community of color) = 83% surcharge for drivers living eight miles away from College Park

Link to the Full Report Here.

Policy Recommendations to correct these inequities:

For reasons that may be wholly unintended or deeply linked with historic zip code-based discrimination, the outcome of zip code pricing in Maryland is that people of color consistently pay significantly higher premiums for the coverage mandated by state law. That’s why MCRC and CFA are working with legislators to pass these new protections:

• Draw zip codes over larger territories to smooth the stark differences made within a two-mile radius as currently exists.
• Reduce the disparity in pricing between zip codes by regulating the percentage by which zip codes can vary. For example, policymakers could address the disparate impact of zip code pricing by capping the difference between zip codes to no more than 25% range. 
• Eliminate or minimize the use of non-driving-related factors in setting auto insurance rates. 
• Pilot a low-cost auto insurance program for low-income drivers with good driving records, modeled on California’s low-cost program. This pilot program should focus on Baltimore City and Prince George’s County, the two highest-priced auto insurance communities in Maryland.  

QUOTES: 

Marceline White, Executive Director, Maryland Consumer Rights Coalition: 

“Communities of color are paying substantially more for mandatory auto insurance just because of where they live, not because of their driving records. Why should people be penalized for where they live? The General Assembly can rectify that by passing HB1251 and SB850. This modern-day redlining must stop!”

 Jack Gillis, Executive Director, Consumer Federation of America:

“Since Maryland requires all drivers to purchase insurance, it has a special responsibility to ensure affordability. This bill is a long overdue reform that will reduce unfair discrimination and ensure that drivers pay premiums based on their actions, not their neighborhoods.”