Reaction To New CA Insurance Department Rules To Limit Education & Occupation In Auto Insurance

Published on

Los Angeles, CA –  “A year ago, Consumer Watchdog and organizations representing consumers, low-income workers and communities of color petitioned Insurance Commissioner Ricardo Lara to ban the use of occupation and education to set auto insurance premiums. These unfair surcharges on lower-income and less-educated drivers drive up the cost of insurance for people who can least afford it. They also violate Californians’ civil rights by allowing insurers to charge non-white, lower-wage drivers more. Commissioner Lara rejected that petition and chose not to ban education and occupation outright,” said Carmen Balber, executive director of Consumer Watchdog.

“The Department of Insurance instead began a process that resulted in the draft regulation announced today. As proposed, that regulation would not completely eliminate the use of a person’s job or educational achievement to set auto insurance rates. Consumer Watchdog is optimistic that it has the potential to ameliorate the discriminatory pricing impact of job and education level on millions of Californians. The devil will be in the details. We look forward to participating in the workshop process to ensure a final rule protects Californians against unfair discrimination.”

Read the groups’ February 2019 petition:

Many California auto insurance companies surcharge drivers up to 25.09%, according to a Department of Insurance analysis, in order to give discounts to doctors, lawyers, other well-paying professions, and drivers with college degrees. The surcharge is illegal under California’s insurance reform law, Proposition 103. Voters banned insurance redlining with Prop 103 by requiring insurance rates to be based on how you drive, not who you are. Insurers are using job and education as an end run around those protections.

A Consumer Watchdog analysis of online premium quotes in January revealed that seven of the ten largest auto insurers in California overcharge drivers without college degrees or higher-paying professions. The surcharges at Farmers, GEICO, Progressive, AAA, Allstate, Liberty Mutual and Mercury range from 3.5% to 14.7% based on a person’s occupation and education level. State Farm, USAA and AAA Northern California do not use education or occupation as rating factors.

Examples of the price difference for drivers with a basic coverage policy included:

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

The surcharge for drivers insured with Allstate was 3.5%, 8.1% with AAA, from 5% to 10% at Liberty Mutual and from 3.7% to 6.5% at Mercury.

Read the news release:

California’s insurance reform law, Proposition 103, 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. Companies must prove any additional rating factors are “substantially related to the risk of loss” and be approved by the Commissioner. Companies are using occupation and education illegally because they have never been approved under Prop 103.

Communities of color are the hardest-hit by this discriminatory pricing. In 2017, just 32.6 percent of Californians over the age of 25 had a bachelors’ degree or higher. That number falls to 12.2 percent of Latinx and 24 percent of black Californians with a bachelors’ degree or higher. Latinx and black Californians also earn lower median incomes than white Californians. Undocumented Californians in particular are most likely to have jobs in low-paying industries like agriculture, child care, restaurants, hotels and construction. These communities all pay more to subsidize discounts for drivers with better-paid professions.

Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

Latest Insurance Videos

Latest Insurance Releases

Insurance In The News

Latest Privacy Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Insurance Releases