In a survey of auto insurer website quotes, the Consumer Federation of America found that auto insurance premiums are high for about 8 million low- and moderate-income drivers who finance their car purchases.
These drivers are required purchase the comprehensive and collision coverage required by auto lenders in addition to the liability coverage required by states. In the 15 cities the federation surveyed, annual premium quotes were almost always more than $900 and were usually more than $1,500.
“High auto insurance premiums represent a huge barrier to car ownership, and economic opportunity, for millions of lower-income Americans,” said Stephen Brobeck, executive director of the federation. “Researchers agree that they and other Americans, even those in large cities, gain access to better jobs and other opportunities through access to a car.”
“State governments, which require drivers to purchase auto insurance, have a special responsibility to ensure that this insurance is affordable in an auto-dependent society,” said J. Robert Hunter, the federation’s director of insurance. “These governments should create low-income programs that pay for themselves, such as California’s, and also end well-documented price discrimination against lower-income drivers.”
In its price survey, the federation asked for price quotes for a driver with the following characteristics from the nation’s five largest auto insurers – State Farm, GEICO, Allstate, Progressive, and Farmers, which together have more than half of the U.S. private car marketplace:
- Is a single female 30 years old.
- Received license at age 16 and has never had an accident or moving violation.
- Has a high school degree and works as a bank teller.
- Drives a financed 2004 Honda Civic 10,000 miles/year and is currently insured.
- Seeks minimal $25,000/$50,000 liability coverage unless state minimum is higher. The standard coverage for most Americans purchasing auto insurance is $100,000/$300,000.
- Assigned collision/comp coverage by insurer to those with financing, usually with $500 deductibles.
- Rents in city, $30,000 median income area, and a suburb, $50,000 median income area.
For its analysis, the federation received 150 price quotes – five insurers in 15 cities with city and suburban addresses – and was provided 147 quotes through company websites. These quotes have the following characteristics:
- No quotes were under $500 per year, and only eight, 5 percent, were under $900, with half of those from Cleveland.
- Most quotes, 76 or 52 percent, were higher than $1,500.
- Nearly one-third of the quotes, 45 or 31 percent, were higher than $2,000, and 16, 11 percent, were above $3,000.
- GEICO tended to charge the least, for example, six of the eight quotes under $900, while Farmers tended to charge the most, for example, 12 of the 16 quotes over $3,000.
- Within individual markets, huge price ranges usually exceeding 100 percent. “Any economist will tell you that price ranges greater than 100 percent for essentially the same product reveal lack of true price competition,” said Brobeck.
- Prices in near suburbs were usually not much lower than those in cities.
“As well as denying economic opportunity, these high premiums pressure many lower-income drivers to break the law by driving without insurance,” said Hunter.
The medium-size and large cities were selected to include all areas of the country. They, along with nearby suburban communities listed after the city, are:
- Hartford, East Hartford; Buffalo, West Seneca; and Baltimore, Overlea – from the Northeast
- Louisville, Lyndon; Atlanta, Morrow; and Jacksonville, Yulee – from the South.
- Cleveland, Richmond Heights; St. Louis, Florissant; and Minneapolis, Richfield – from the Midwest.
- Denver, Golden; Houston, Spring; and Phoenix, Peoria – from the Near West.
- Oakland, Berkeley; Portland, Milwaukie; and Seattle, Burien – from the Far West.
