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Are blue collar workers paying more for car insurance in Michigan?

January 15, 2015 by Steven M. Gursten

Yes: Progressive, Liberty Mutual & Farmers ‘charge higher rates to drivers with less education and lower-status jobs,’ Consumer Federation Of America reports

blue collar workers pay more for auto insurance

Should a driver be penalized by paying more for auto insurance because they have less education, or make less money?

Of course not! I’d like to think that’s common sense, but then again, I practice insurance law in Michigan, a state that allows credit scoring.

I’ve referred to credit scoring as legal discrimination. Credit scoring perversely and negatively impacts minorities, and those often who are least able to afford No Fault insurance, even though it’s required by law in Michigan. And the consequences for driving without No Fault auto insurance are catastrophic, even though in many cities like Detroit, it’s estimated that approximately 50% of drivers don’t have it.

Unfortunately, common sense is not always the guiding principle when it comes to business practices within the auto insurance industry. Especially when they know they can get away with it.

Further proof of this was  on full display in a study I recently read that was conducted by the Consumer Federation of America.  The Consumer Federation study concluded:

“[M]ajor auto insurers” such as Progressive, Liberty Mutual and Farmers “charge higher rates to drivers with less education and lower-status jobs” than they do to drivers with more education and higher-status jobs.

The CFA’s findings in its study, “Major Auto Insurers Charge Higher Rates to High School Graduates and Blue-Collar Workers,” are particularly significant to Michigan auto insurance consumers because three of the state’s largest auto insurers are mentioned: Progressive; Liberty Mutual and Farmers.

Here’s what the CFA had to say about the education-based price differentials charged by those Michigan auto insurers:

  • “Progressive … often charges a factory worker with a high school degree higher annual premiums than a plant supervisor with a college degree” by anywhere from 8% to 33%.
  • “Liberty Mutual charges a high school graduate higher annual premiums than a college graduate” by anywhere from 10% to 13%.
  • “Farmers charges those who are neither professionals nor certain government workers five percent higher premiums.”

To conduct its study, the CFA obtained price quotes from auto insurers using the same driver profile, but varying the education and occupation factors, e.g., college graduate versus high school graduate and factory worker versus factory superintendent.

Related information:

Why State Farm, Allstate charge you more if you have a poor credit score

 – Photo courtesy of Creative Commons, by Plumber Orange County

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