Your driving record seems a legitimate risk for insurers to consider when they price auto insurance.
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It’s an insurance landscape not unlike that which has provoked efforts to overhaul the American healthcare system-and that in December 2013 caused the Federal Insurance Office to issue a report entitled “How to Modernize and Improve the System of Insurance Regulation in the United States”, including the suggestion that states revisit the question of “whether or in what manner marital status is an appropriate underwriting or rating consideration”.
Yes, young men in red sports cars will pay more for coverage than everyone else, but it’s hard to see how being widowed, divorced or separated has much to do with the odds you’ll be in an accident.
The CFA says data used to determine pricing differences between single and married couples derive from an injury study released in 2004 by a group in New Zealand.
Four of six major vehicle insurers raise rates on widows significantly – 8 percent to 29 percent – after the death of their husbands, according to research by a consumer advocacy group. It looked at six major insurance firms: State Farm, GEICO, Farmers, Progressive, Nationwide and Liberty. “Nationwide sometimes hiked rates but State Farm never did nor did they ever vary rates on marital status”, Brobeck says.
Why should marital status factor into pricing?
By contrast, Oakland, Calif. varied the least of the cities tested, with Geico quoting $388 annually for a married individual and $478 for those single, separated or divorced.
“Auto insurance is a highly competitive business and most people find they have an array of policy options, at various prices, to choose from”, said Robert Hartwig, president of the Insurance Information Institute.
In a telephone news conference, the two CFA officials suggested that companies may be favoring wealthier married couples simply because such customers are more likely to insure multiple vehicles – as well as their homes. “It’s about the accidents”. “They don’t get in as many accidents and the accidents they’re in are less severe”, Lynch adds. The consumer group says the study has found the increased rates have not been founded on figures that attest to higher risks. “And the difference in injury rates was only about one percentage point”.
Farmers, for example, will charge a single, separated or divorced women as much as 34 percent more than a married women, with all other factors being equal, the study found.
Consumer activists are criticizing the nation’s auto insurers for factoring in marital status in developing rates. By varying the marital status of this driver, CFA discovered that most insurance providers charge married drivers less than others. It has also released a study looking at the connection between auto insurance rates and education. In today’s auto insurance industry, complex pricing algorithms take into account an ever-growing number of factors like driver credit score, gender, and age-factors that seemingly have very little to do with, well, actually turning the steering wheel. It allows customers to use the information to shop around.
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Allstate wasn’t included in the marital status survey because of time constraints and a redesign of its website that the CFA said makes it more hard to make price comparisons.
