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Should renters pay more for auto insurance than homeowners?

April 2, 2016 by Steven M. Gursten

Consumer Federation of America determines that renters – even those with perfect driving records – pay more for auto insurance than homeowners

renters and car insurance prices, image

I write often about credit scoring, and how the practice unfairly discriminates against and punishes people who often have excellent driving records.  I’ve also pointed out how the negative impact of credit scoring – now that it’s legal in Michigan thanks to the Michigan Supreme Court – falls disproportionately upon the poor and minorities.

Renting versus owning a home apparently has similar negative consequences – for the renters.

But shouldn’t a person with “a perfect driving record” pay the same for auto No Fault insurance – whether they rent or own their homes?

They should. But they don’t.

In its recent study, “Good Drivers Pay More for Basic Auto Insurance If They Rent Rather Than Own Their Home,” the Consumer Federation of America (CFA) concluded the nation’s major auto insurers charge higher prices to consumers who rent, rather than own, their homes – even if the “renters” have “perfect driving records.”

Specifically, the CFA found:

“Major auto insurance companies charge good drivers as much as 47 percent more for basic liability auto insurance if they [rent, but] don’t own their home …”

To conduct the study, the CFA evaluated the auto insurance prices charged to renters and homeowners – who had “a perfect driving by major auto insurers in 10 cities. In both scenarios, the consumers – whether they rented or owned their homes – had “a perfect driving record.” The study showed that the average price differential charged by major auto insurers to renters versus homeowners was as follows:

auto insurance renters versus homeowners, image

Based on the results of its study, the CFA is:

“[C]alling on Insurance Commissioners and lawmakers around the country to prohibit insurance companies from penalizing good drivers based on their status as renters. [The CFA explains that] homeownership status is a method by which [auto] insurance companies assess customers’ income rather than driving risk and should not be used as a factor in determining premiums.”

This is an auto law blog, and as an attorney who practices in this area, I write about all of the unfair ways car insurance companies treat people.  Credit ratings and charging Detroiters among the highest prices in the nation tops my list of discriminatory practices, and I’m disappointed that there’s an additional factor to now add to this list.

I should also point out that, just as with credit scoring, the consequences of allowing insurance companies to charge more for auto No Fault insurance to people who rent than those who own homes falls much harder on the poor, the young, minorities and those first entering the workforce.

It’s wrong. We should not allow the insurance industry to get away with this.

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