U.S. auto insurance practices might hurt low-income earners: report

Mon Jul 22, 2013 6:32pm EDT
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By Matt Haldane

WASHINGTON (Reuters) - Several large U.S. auto insurance companies use education levels and occupation to set rates, effectively pricing some low- and moderate-income earners out of the market, according to a report by the Consumer Federation of America.

The report, released on Monday, looked at premiums set by the 10 largest auto insurance companies in 10 urban areas across the United States.

The CFA plugged information about a fictional person into each company's website to get a quote, changing only education level and occupation to see the effect on rates. Five of the insurance companies were found to collect such information.

In some cases, premiums for minimum-liability coverage exceeded $2000 and in one instance, in Baltimore, it was more than $4000, from Travelers Insurance.

"The quoted prices, especially the nine exceeding $2000, show that insurers either are overcharging lower-income consumers or are not interested in serving them," Bob Hunter, the CFA's director of insurance, said in a statement.

Officials at Travelers were not immediately available to comment.

The report found that Geico, part of the Berkshire Hathaway group of companies, charges more in six of the analyzed markets for a factory worker with a high school diploma than for a factory supervisor with a college degree. The rate could be as much as 45 percent more in Seattle or as low as 20 percent more in Baltimore.

Progressive Corp., which had the second-highest difference in premiums, was found to charge the factory worker 33 percent more in Baltimore and 8 percent more in Oakland, California.   Continued...