Auto insurance

Consumer Federation of America responds to auto insurance price disparity survey

LOUISVILLE, Ky. (WAVE) — Tayquan Spencer-Smith was shocked at the differences he saw when shopping for auto insurance when all other factors were the same, but swapping his address to west of Louisville versus one east of Louisville.

“It’s appalling, because we’re making it up that they don’t want to charge someone else,” Spencer-Smith said.

The investigation was then extended to a larger scale. A family with the same driving record, the same three cars and the same coverage was taken to a licensed insurance agent to provide auto insurance quotes.

The only thing that was changed was the family’s address to put them in various zip codes around Louisville.

In the east, in ZIP codes like 40223 in Anchorage/Middletown and 40299 near Jeffersontown, the annual cost of insurance was just over $3,000.

In 40217, the Schnitzelburg area, it was just over $4,000.

In the South End, like 40272 near Valley Station, it was around $4,482.

However, in West End postcodes, such as 40210, 40211 and 40212; neighborhoods such as Park Hill, Park Duvalle, and Chickasaw, annual insurance costs were more than double the east end. Prices ranged from $6,318 to $6,653 in zip codes with median household incomes ranging from $20,000 to $27,000 per year.

“This is a great example of unjust discrimination and that’s why we’re calling on the Kentucky Department of Insurance to investigate what’s going on,” said Michael DeLong, research and advocacy associate for the Consumer Federation of America. .

The Consumers Federation of America saw the original report and sent a five-page letter to the Kentucky Department of Insurance requesting an investigation into pricing practices.

The organization’s researchers, like DeLong, have looked more extensively at Kentucky.

“We’ve noticed that as the percentage of black consumers in a neighborhood increases, auto insurance premiums increase,” DeLong said. “So racism is quite widespread.”

In addition to what the CFA called “territorial price discrimination,” it also found that a person’s credit history may have more to do with what a person pays than their driving history. .

“We did our own analysis of some of the postcodes you mentioned, and we found West End drivers with bad credit paying over $1,000 more for car insurance than drivers in the East End with bad credit,” DeLong said. “In Kentucky, a person with a good driving record but bad credit actually pays a higher premium on average than a Kentucky driver with great credit but a drunk driving conviction. That does not make any sense. This is not correct. It’s anti-American. It’s harmful, and we think car insurers should stop trying to discriminate against poor consumers and charge people based on their driving record.

According to the chart that the CFA included in its letter to the state insurance department, whether a person is in the East End or the West End, the difference in car insurance premiums between people with excellent credit and bad credit is substantial.

In the West End postcodes 40210 and 40212 it’s two and a half times as much.

So why are car insurers doing this?

“We think auto insurers are using these factors of someone’s neighborhood, zip code, credit history, as proxies for income and indirectly for race,” DeLong said. “They discriminate against poor consumers in order to favor wealthier consumers who have more disposable income, so they can purchase additional policies.”

Although we were unable to get a response from the insurance companies, some agents suggested that the postcode disparity was linked to crime.

Our analysis of Louisville Metro Police crime data revealed a greater proliferation of vehicle thefts and vehicle burglaries in the West End.

“Crime can play a role, but it’s not enough,” DeLong said. “That’s not taking into account the very large premium increases we’ve seen.”

The CFA’s letter to the state Department of Insurance stated in its study of “every zip code in America, the CFA found that the Louisville core-based statistical area has the third most severe disparities in car insurance premiums between predominantly white and predominantly black communities.

They cite a Federal Insurance Office study that shows “more than 400,000 Kentucky residents live in 99 zip codes where auto insurance is unaffordable, including the West End communities profiled in the WAVE 3 report.”

“What’s horrible about this is that Kentucky requires people to buy car insurance, but the Kentucky Department of Insurance isn’t doing its job to make sure it’s affordable and needs to step up and do its work,” DeLong said.

On Monday, an interview was requested from the State Insurance Department about this or a comment responding to the CFA letter. They said they would get back to us, but they don’t have a deadline for that report yet.

You can read the full letter from the Consumer Federation of America here:

WAVE – Louisville and southern Indiana NBC affiliate. Follow us on Twitter and Instagram @wave3news.(VAGUE)

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