Study finds auto insurance premiums suspicious with respect to race and ZIP codes

[ucbalumnus]

https://www.propublica.org/article/minority-neighborhoods-higher-car-insurance-premiums-methodology
http://www.consumerreports.org/consumer-protection/car-insurance-companies-charge-higher-rates-in-some-minority-neighborhoods/

They studied auto insurance premiums in CA, IL, MO, and TX in relation to claim costs. Note, however, that the methodology in the various states differed, including the definition of a “minority” ZIP code (e.g. in CA, they used “underserved” ZIP codes that were >66% non-white, < median household income, and with high percentage of uninsured drivers).

They found higher premiums for “minority” ZIP codes over a wide range of risk levels in IL. In CA, they found higher premiums for “underserved” ZIP codes mainly in the highest risk ZIP codes (which also had the fewest samples). CA (except for high risk non-“underserved” ZIP codes) and “minority” ZIP codes in MO showed mostly linear relationships between risk and premium, while the relationship between risk and premium was not what one would expect elsewhere.

[BunsenBurner]

Did the study look at the credit scores? That is what the insurance cos are looking at in the first place.

[ucbalumnus]

@BunsenBurner

Did the study look at the credit scores? That is what the insurance cos are looking at in the first place.

They used a specific driver profile, car, and insurance amounts for premium pricing:

@authors of the study

In order to control for factors outside of geography, we limited our analysis to a single profile – a 30-year-old female safe driver who is a teacher with a bachelor’s degree and excellent credit, with no accidents or moving violations, and who is purchasing standard coverage with the company for the first time. She drives a 2016 Toyota Camry, and has a fifteen-mile commute, and drives around 13,000 miles a year. She is purchasing a policy for $100,000 of property damage coverage and $100,000 to cover medical bills per person up to $300,000 per accident.

We focused on bodily injury and property damage insurance premiums because most states require drivers to purchase them. Within the insurance industry, the combination of bodily injury and property damage coverage is known as liability insurance.

We compared the premiums charged by each insurer in each zip code with the average risk of liability payouts by all insurers in that zip code.

[BunsenBurner]

Ok thanks. Now I see that there are 2 links in your post - the CR crap story (what else can that rag publish?) and the actual study. When you post multiple links, please separate them by an empty line.

[roethlisburger]

One lesson of the study is it can pay to shop around for car insurance. The ratio ranges from 0.981 to 1.327 in California, depending on the insurance company.