The Consumer Federation of America released a new analysis Monday that suggests some major auto insurers charge higher rates to drivers with less education and lower-status jobs.
In other words, the guy with a college degree appears to be getting a better deal on auto insurance premiums.
The CFA analysis was conducted in May and June 2013.
It examined the use of "education and occupation" by the ten largest auto insurers based on market share – State Farm, Allstate, GEICO, Progressive, Farmers, USAA, Liberty Mutual, Nationwide, Travelers, and American Family – in ten major urban areas in different parts of the country – Hartford, Baltimore, Atlanta, Louisville, Chicago, Houston, Denver, Phoenix, Oakland, and Seattle.
CFA used the websites of these insurers to determine whether they use education and occupation in their pricing and, if so, the impact of the use of these factors. The driver studied was a 30-year old single woman renting in a moderate-income area (c. $30,000 median income), who was driving a 2003 Honda Civic, had driven for ten years with no accidents or moving violations, and was without insurance coverage for the past 15 days.
CFA estimates that one-quarter to one-third of drivers with household incomes under $36,000 – 40 percent of all households – are uninsured.
The report highlighted minimum liability coverage, which state governments require:
• GEICO often charges a factory worker with a high school degree far higher annual premiums than a plant supervisor with a college degree – 45% more in Seattle ($870 vs. $599), 40% more in Hartford ($1299 vs. $926), 33% more in Oakland ($922 vs. $693), 23% more in Louisville ($2200 vs. $1791), 21% more in Chicago ($1013 vs. $840), and 20% more in Baltimore ($1971 vs. $1647)
• At GEICO, these differences would be even greater if, for education, the comparisons also included no high school degree and a graduate degree. For example, the Baltimore factory worker would pay an annual premium of $2061 with no high school degree, an annual premium of $1971 with a high school degree, an annual premium of $1801 with a college degree, and an annual premium of $1722 with a graduate degree.
• Progressive also often charges a factory worker with a high school degree higher annual premiums than a plant supervisor with a college degree – 33% more in Baltimore ($1818 vs. $1362), 14% more in Houston ($1406 vs. $1236), 9% more in Louisville ($2390 vs. $2185), 9% more in Denver ($995 vs. $911), and 8% more in Oakland ($736 vs. $684).
• Liberty Mutual charges a high school graduate higher annual premiums than a college graduate – 13% more in Baltimore ($2116 vs. $1877), 13% more in Houston ($1373 vs. $1216), 12% more in Phoenix ($1592 vs. $1418), and 10% more in Hartford ($1913 vs. $1735). In five other cities studied – Atlanta, Louisville, Chicago, Denver, and Seattle – Liberty’s website quoted rates for a college graduate but not for a high school graduate.
• In many cities, Farmers charges those who are neither professionals nor certain government workers five percent higher premiums. For each of these factors, all factors except education and income were held constant.