Watchdog: Auto insurers overcharging the poor

[Javaman]

http://money.cnn.com/2012/01/31/pf/auto_insurance_rates/index.htm?iid=HP_LN

NEW YORK (CNNMoney) -- The car owners who are least able to afford high auto insurance rates are getting charged the most for coverage, according to a consumer watchdog group.

In a report released earlier this week, the Consumer Federation of America claimed that auto insurers are using pricing methods that put low- and moderate-income drivers at a disadvantage, frequently charging them much higher premiums than higher-income drivers.

171PrintCommentThe report, which took into account more than 100 auto insurance pricing studies including several of its own, claimed that insurers used factors, such as education, where a person lives and works, credit history and age to determine the amount they will charge. While it's illegal in all 50 states to base insurance rates on race or income level, the CFA claims these other factors are a backdoor way for insurers to determine a customer's income level.

The consumer group said it also found that low-income customers often paid more for less coverage.

more at link...

[Tansy_Gold]

1. If I understand correctly, and this was not included in the article,

this pricing system was put in place by Progressive Insurance to keep its pay-outs down. They discovered that insureds with poor credit ratings had a higher rate of claims, so Progressive actively solicited good credit customers and gave them great rates. This left the other insurers to deal with a class of drivers who had poorer credit AND an overall higher rate of claims.

Regardless of driving record, a person with poor credit cannot get low insurance rates.

[xchrom]

2. Du rec. Nt