Consumer Federation of America study shows auto insurance companies – especially Progressive and GEICO – charge more to safe, moderate-income drivers than they do to rich drivers with car accidents
There’s an old saying that it takes money to make money.
Well, in the context of car insurance, it seems that it takes money to keep more of your money.
In a recent study, the Consumer Federation of America found that “a driver with a moderate income and a perfect driving record is often charged more for auto insurance than higher-income drivers with DUIs, accidents and speeding tickets …” Specifically, the results of the CFA study, “Major Insurers Charge Moderate-Income Customers With Perfect Driving Records More Than High-Income Customers With Recent Accidents,” showed:
- “Upper-income drivers with DUIs often pay less than good drivers of modest means with no accidents or tickets on their driving record. In 21 of the 30 tests (70%) in which a comparison was possible, a moderate-income driver with a perfect driving record was charged more for basic liability insurance than a high-income driver with a recent DUI conviction.”
- “Moderate-income drivers with perfect records pay more than upper-income drivers who caused an accident in which someone was injured. In 20 of 38 tests (53%), moderate-income drivers with clean records were charged more than high-income drivers who recently caused an accident resulting in bodily injury.”
- “Progressive and GEICO consistently charge upper-income bad drivers less than moderate-income good drivers. The premium for a basic auto insurance policy from these two companies cost more for a good driver with a moderate-income than for a higher-income driver with a recent accident and/or violation on her record 78 percent of the time.”
- “Moderate-income good drivers often pay more than upper-income drivers with multiple points on their record. In over half of the tests (19 of 36), a moderate-income driver with a perfect driving record was charged more for basic insurance than a high-income driver who caused an accident and was convicted of a speeding violation within the past 12 months.”
To the extent these discriminatory pricing practices are being used by the insurers writing Michigan’s No Fault insurance, which provides car accident victims with essential PIP benefits such as medical and wage loss reimbursement, our attorneys believe the Insurance Commissioner needs to get involved and put an end to it. Michigan does not allow discriminatory pricing, and if this doesn’t meet the definition of discriminatory, what does?
After all, Michigan law provides that “[a]ll rates for automobile insurance … shall not be … unfairly discriminatory,” and a “rate for a coverage is unfairly discriminatory in relation to another rate for the same coverage if the differential between the rates is not reasonably justified by differences in losses, expenses, or both, or by differences in the uncertainty of loss, for the individuals or risks to which the rates apply. (MCL 500.2109(1)(b))
Progressive, GEICO discriminating against moderate-income, safe drivers
Not surprisingly, the CFA study found Progressive’s and GEICO’s discriminatory pricing for auto insurance particularly troubling:
- “In most cities, Progressive and GEICO charge more to moderate-income drivers with perfect records than to higher-income drivers with accidents and violations on their record.”
- “A moderate-income driver with a clean record is charged more than a higher-income driver with a recent at-fault accident and/or moving violations 86 percent of the time by Progressive and 70 percent of the time by GEICO.”
How the insurance industry legally discriminates
This is yet another troubling example of how the insurance industry quite legally discriminates against people based upon race and income levels.
As an insurance and No Fault attorney, I’ve written about this issue in depth, including about the results of a similar study in 2014. In Michigan, the insurance industry is also legally allowed to discriminate based on credit scores and zip codes. Doing so primarily punishes low-income minorities in largely African American cities like Detroit and Pontiac.
I’ve also called this a civil rights issue, and I’ve been quoted in several publications as an attorney expert on the car insurance and uninsured drivers crisis in Detroit.
Detroit residents are charged the most for auto insurance in the entire country. This punishes people who are mostly poor and black, and it forces people who need car insurance the most to choose between putting food on the table and purchasing auto No Fault insurance coverage to comply with the law and protect themselves and their families if they’re ever injured in a wreck. We know which one they usually choose, which is why it’s estimated that over 50% of the drivers in Detroit are driving without any insurance at all, according to the Detroit Legal News.
Under Michigan law, uninsured drivers are also completely barred from bringing an injury lawsuit for their pain and suffering if they’re hurt in a motor vehicle accident – even when they’re completely innocent and not at fault for the wreck. Adding insult to injury (no pun intended), the insurance company of the wrongdoer driver who caused the car accident can then sue the innocent but uninsured driver for their money back that they pay out in No Fault PIP benefits to their own at-fault insured.
I’m the current President of the Motor Vehicle Trial Lawyers Association, and I also litigate serious car and truck accident cases throughout the country, so I’m very familiar with the auto laws in many states. I’ve never seen or heard of any state other than Michigan that allows such a draconian and unreasonably harsh penalty for uninsured drivers.
Michigan’s uninsured drivers law compounds the harms to people who are uninsured. It’s also a stark and troubling reminder of the power of the auto insurance industry in Michigan, who changed the law to hammer the uninsured in 1995, knowing it would save them countless millions of dollars in paying out legitimate injury claims to innocent motorists.
The most important part of my message today is that the consequences for “driving dirty,” or without car insurance in cities like Detroit is shockingly harsh. It means that poor black people who are completely innocent but injured in a serious car or truck accident because of another person’s negligence are barred from the courthouse. People who drive without insurance actually lose their rights to a jury trial, a fundamental right that is guaranteed under the United States Constitution!
For more information, please read my blog post about the top 9 dangers if driving uninsured in Michigan.