Organizations Petition State To Ban Job, Education Criteria When Setting Auto Insurance Rates

Published on


February 22, 2019

Organizations petition state to ban job, education criteria when setting auto insurance rates

Consumer Watchdog and a host of community organizations are urging California insurers to stop imposing higher auto insurance rates on low-income drivers with less education.

In a news conference held Thursday in Santa Monica, the groups announced they have petitioned California Insurance Commissioner Ricardo Lara to ban the use of occupation and education to set auto insurance premiums. The petition describes that criteria as “thinly veiled surrogates for wealth, ethnicity and race.”

“Millions of Californians are getting overcharged for their auto insurance simply because of the job they have or because they don’t have a college education,” said Carmen Balber, Consumer Watchdog’s executive director. “This impacts the Californians who can least afford to pay more.”

Accurate variables?

Mark Sektnan, vice president for the American Property Casualty Insurance Association, disagrees.

“The Consumer Watchdog report is based on a misunderstanding of how insurance underwriting and rating works,” he said. “Auto insurers have collected data for decades and have found that the education and occupation of a driver can be accurate variables for predicting the likelihood and severity of insurance claims.”

The use of those factors are allowed by regulators because they are valid predictors of loss and can result in more accurate underwriting and pricing, Sektnan said.

Up to 14.7 percent more

Still, Balber said the companies are charging lower-earning drivers 3.5 percent to 14.7 percent more than they should be paying, allegedly so they can give discounts to doctors, lawyers and other well-paid professionals, including drivers with college degrees. Consumer Watchdog arrived at those percentages by comparing the rates between drivers with low-paying jobs and limited education and others with more education and better paying jobs — with all other factors being equal.

The petition targets seven insurance companies it alleges are overcharging customers. They include Farmers, GEICO, Progressive, AAA, Allstate, Liberty Mutual and Mercury.

Farmers said its rates are determined on the basis of each driver’s unique circumstances.

“Farmers has discounts for many different professions including hardworking California drivers who are teachers, fire fighters, law enforcement officers, and nurses,” the company said in a statement “All of these discounts are approved by the California Department of Insurance and our data supports that drivers in these occupations tend to present a lower risk than the population as a whole.”

Prop. 103

Consumer Watchdog said premium surcharges based on occupation and education are illegal under California’s insurance reform law, Proposition 103. It requires auto insurance rates to be based primarily on a driver’s safety record, miles driven and driving experience. It banned the use of arbitrary and irrelevant personal characteristics to discriminate against drivers.

Harvey Rosenfeld, Prop. 103’s author, said the practice is particularly egregious in light of the financial struggles many Golden State residents face.

“When you look at this data you get a sense of the indignation and frustration the average person in California must feel who isn’t among the elite,” he said. “Their wages are stagnant while the rich keep getting richer.”

‘Angry and frustrated’

Monic Uriarte, a 55-year-old single mother of two who lives in San Gabriel and works two jobs, is insured with AAA. She pays an annual auto premium of $4,333, which covers herself and her two daughters. Consumer Watchdog said she’s paying 8 percent too much.

“I’m angry and frustrated … and I feel discriminated,” Uriarte said. “It’s just unfair.”

The petition offers examples of the rate disparities California drivers face:

  • Farmers Insurance charges a factory worker a 14.5 percent higher annual premium than either an accountant or a physician ($1,523 vs. $1,330)
  • Progressive Auto Insurance charges a factory worker 6.3 percent more in annual premiums than an attorney or a physician ($878 vs. $826), and an office manager with a high school diploma is charged 6.3 percent more than the same driver with the same job who has an undergraduate degree
  • GEICO charges a factory worker 14.7 percent higher annual premiums than the same driver who is a corporate CEO ($977 vs. $852).

“These unfair surcharges drive up the cost of insurance for people who can least afford it,” the petition said. “They also skirt civil rights protections to allow insurers to charge non-white, lower-wage drivers more.”

Communities of color, gender

Communities of color are the hardest-hit by this discriminatory pricing, according to Consumer Watchdog. In 2017, just 32.6 percent of Californians over the age of 25 had a bachelor’s degree or higher. That number falls to 24 percent for black Californians and 12.2 percent for the state’s Latino population.

California recently became the seventh state to prohibit auto insurance companies from using gender as a factor in determining auto premiums. Ironically, that trend of equality could result in cheaper rates for young male drivers who typically are riskier to insure, according to a report in the Washington Post.

Other organizations that signed the petition include United Policyholders, Public, Neighborhood Assistance Corporation of America, La Casa de la Raza, KIWA (Korean Immigrant Workers Alliance), Courage Campaign, Consumers for Auto Reliability and Safety, Consumer Federation of America and Consumer Action.


Kevin Smith handles business news and editing for the Southern California News Group, which includes 11 newspapers, websites and social media channels. He covers everything from employment, technology and housing to retail, corporate mergers and business-based apps. Kevin often writes stories that highlight the local impact of trends occurring nationwide. And the focus is always to shed light on why those issues matter to readers in Southern California.

Follow Kevin Smith @sgvnbiz

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