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What insurance companies are the worst offenders at charging unfair car insurance prices?

August 15, 2017 by Steven M. Gursten

CPAN study shows Progressive, Liberty Mutual, Esurance, Allstate, State Farm and AAA charge less in Michigan to home-owning lawyers than to out-of-work renters

Unfair car insurance prices

Yesterday, I talked about the eye-opening study from the Coalition Protecting Auto No-Fault (CPAN), “Comparing Socioeconomic Status and Auto Insurance Rates in Michigan.” The report showed how Michigan car insurance companies are charging vastly different prices for car insurance to equally safe drivers. These different car insurance prices are not based on safety or driving records but on completely non-driving related factors such as a driver’s job, education and whether he or she owns a home or rents.

Today, I want to talk about the car insurance companies that are the worst offenders at charging unfair car insurance prices. They are identified by CPAN as engaging in “unfair” “pricing practices” of using “socioeconomic status” to set rates, and have produced a situation where:

“Michigan drivers who have working class jobs, do not have a college degree, or rent rather than own their home pay an average of $233 per year more for [basic] auto insurance compared to their white collar peers” even though they have equally “clean driving records …”

To be blunt, as a No-Fault auto insurance attorney who regularly blogs about the price-setting and claims practices of Michigan auto insurers, I want to name names. I’ve called this legalized discrimination in the past. This practice of charging equally safe drivers with the same driving records vastly different prices based upon income and socioeconomic factors has been outlawed in many states because it discriminates against the poor. Minorities are disproportionately affected as well.

But in Michigan the practice is still legal, which gives car insurance companies a pass to treat people unfairly based upon factors that have nothing to do with their safety and driving record.

Progressive, Liberty Mutual and Esurance are the worst offenders in charging unfair car insurance prices

To gather information for CPAN’s study about “how non-driving related factors influence car insurance rates” in Michigan, researchers obtained online price quotes from six Michigan No-Fault auto insurance companies (which “represent more than half of Michigan’s auto insurance market”) in eight Michigan cities.

The characteristics of the test drivers for whom the study sought price quotes included:

  • All drivers had “a perfect driving record” and “no prior claims.”
  • For each insurer and each city, quotes were obtained for drivers meeting each of five different socioeconomic status.

The range of socioeconomic status included:

  • Lawyer, JD, homeowner
  • Investment banker, MBA, homeowner
  • Factory foreman, BA, renter
  • Factory worker, HS, renter
  • Unemployed, no diploma, renter

Here’s what the CPAN study found:

  • “Progressive, Liberty Mutual, and Esurance are the most aggressive in their use of these non-driving factors” in setting auto insurance prices for Michigan drivers.
  • “These three companies charged an average of $483 more across the state for people out-of-work [who have no high school diploma and who rent their homes] compared to lawyers [with a Juris Doctor degree and who own their homes] with the same driving record.”

Interestingly, CPAN added:

  • “It is notable that not all companies use all of the personal and economic factors tested.”
  • “State Farm and Allstate do not consider drivers’ educational level or their job title …”

It’s an understatement to say I was surprised by CPAN’s assessment of Allstate and State Farm. Readers of this auto lawyers blog know I’ve been frequently critical of the two auto insurance giants. Both Allstate and State Farm regularly land on my “worst insurance companies” list.

But after looking at the study’s stats about the different car insurance rates being charged, I believe there’s more to the story.

Allstate and State Farm DO engage in charging unfair car insurance prices, setting higher rates based on socioeconomic status

Based on the data in Appendix B of the CPAN study, it’s clear that even if it’s not their stated policy, Allstate and State Farm are involved in charging unfair car insurance prices, as they’re setting different prices to equally safe drivers based on socioeconomic status.

Specifically, in the cities and amounts listed below, Allstate and State Farm categorically charge more to factory workers or unemployed workers who rent than they charge to home-owning lawyers and investment bankers:

  • In Detroit, Allstate and State Farm charge $200 and $300 more, respectively.
  • In Flint, Allstate and State Farm charge $200 and $150 more, respectively.
  • In Grand Rapids, Allstate and State Farm both charge nearly $80 more.
  • In Howell, Allstate and State Farm both charge approximately $80 more.
  • In Iron Mountain, Allstate and State Farm charge $94 and $67 more, respectively.
  • In Ludington, Allstate and State Farm charge $88 and $79 more, respectively.
  • In Owosso, Allstate and State Farm charge $86 and $77 more, respectively.
  • In Warren, Allstate and State Farm charge $130 and $149 more, respectively.

[Note: Appendix B sets out the prices charged by six Michigan auto insurers in eight Michigan cities based on good drivers representing each of five, different socioeconomic status.]

Drivers’ socioeconomic status affects AAA’s (Auto Club’s) unfair car insurance prices

Even though the auto insurer’s policy (or unstated policy) wasn’t specifically discussed, it’s clear from the CPAN study data that AAA (aka Auto Club) does use socioeconomic status in charging its unfair car insurance prices. The differences among equally safe drivers range from $190 to $54.

In tomorrow’s blog, I’ll take a closer look at CPAN’s findings on the state’s most expensive car insurance company.

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