Auto Insurance

Auto Insurance Rating Factors and Their Effect on Different Demographics of Consumers

Insurers' Use of Socioeconomic Factors Disproportionately Affects Black and Latino Consumers, Making Them Pay Higher Premiums

 |  Testimony & Comments

Auto insurance companies often charge higher premiums to:

  • safe drivers who rent their home than those who own;
  • single customers than married ones;
  • drivers with less education than those with more;
  • blue collar workers than white collar professionals; and
  • those with lower credit scores.

The chart below shows how African Americans and Latinos are disproportionately represented in the higher premium categories–meaning that auto insurers’ use of these factors results in them paying more. The data are from the U.S. Census Bureau 2018 American Community Survey and the Federal Reserve.

These socioeconomic factors are not related to driving behavior but instead serve as proxies for income, and indirectly for race. CFA has issued numerous studies showing that auto insurance rating factors tied to individuals’ socioeconomic circumstances raise premiums for lower-income customers with clean driving records. There is a growing body of evidence that these socioeconomic factors, which have nothing to do with driving, also disproportionately harm African Americans and Latinos.