The Poor Pay More for Car Insurance Than Bad Drivers Do

New York drivers navigate more risks than other drivers in the country. The demands of busy urban traffic, frequent road construction and crowded interstate highways not to mention the all-seasons weather require drivers to be not only mindful of traffic laws, but also to stay extra alert for sudden hazards. Along with staying safe and avoiding delays, you would expect that New Yorkers are typically rewarded for their safe driving by receiving better car insurance rates.New Yorkers Overpay Car Insurance

However, a recent study published by watchdog group the Consumer Federation of America (CFA) has outraged drivers all over the country by revealing a systemic injustice in the insurance industry. Five of the major insurance providers were shown to quote significantly higher rates for poor and middle class drivers, even those with perfect driving records.

Research Compared Quotes for Moderate and High Income Drivers in Queens

In compiling the report, the CFA made several calls to insurance providers in 15 different cities around the United States. Along with Minneapolis, MN and Los Angeles, CA, the group selected the borough of Queens, NY as one of their sample cities.

Callers represented themselves as two types of 30-year-old female drivers with no accidents or violations on their record. One of the drivers was married, a homeowner, worked as a bank executive and was switching after three years with another carrier. The other driver was single, worked as a bank teller, and had not had insurance for some time.

Progressive Charged the Moderate Income Driver Twice as Much as Someone with High Income and a DUI

Calls were made to insurance companies such as State Farm, GEICO, Allstate, Progressive and Farmers. And in every case, the driver with the lower income was quoted a higher rate than the driver with the higher socioeconomic status. The greatest disparity between price quotes came from Queens, where the lower income driver was quoted a rate 97 percent higher than the high-income driver.

While some insurance industry heads sneered at the findings, a few took the situation seriously. Minnesota Commerce Department Commissioner Mike Rothman pledged to support a bill that would forbid insurance providers from considering any factors beyond driving record when offering quotes.

“It’s not only common sense, but also a basic matter of fairness — that people should be charged rates based only on their actual driving risks, not their level of education, occupation, marital status or irrelevant socioeconomic factors,” he said. “What you are charged for auto insurance should reflect how you drive, not who you are.”

What You Can Do to Save Money on Car Insurance

It can be incredibly frustrating to learn that your socioeconomic status plays a more significant role in your insurance rate than having a good driving record. Unfortunately, the insurance companies who can afford the biggest marketing campaigns are also the ones found by the CFA to be guilty of penalizing low- and middle-income drivers. So before you fall for a catchy slogan, spend the extra time to do your research. Affordable car insurance is out there, but to find it, you’ll have to do your due diligence to save money.

Decide How Much Coverage You Need

Find out the minimum car insurance coverage your state law requires drivers to have. In New York, liability coverage includes a bodily injury minimum of $25,000 per person / $50,000 per accident, and property damage minimum of $10,000.

Some drivers might be better served by purchasing car insurance beyond the required minimum—for example, those who spend a lot of time on the road, or whose regular commute includes dangerous stretches of highway. In addition, if you have a lot of assets, extra liability coverage could protect you from an accident victim going after your personal assets if you are found at fault.

Gather Insurance Quotes and Company Information

The more time you spend researching your insurance options, the better your odds of finding an affordable car insurance. We recommend that drivers set aside at least an hour to compare different policies from different companies. Make sure to check out the websites of individual companies, as well as one-stop comparison sites, since not all insurance providers will offer information on the comparison sites.

To streamline your process, gather the information you’ll need for the application ahead of time. This includes,

  • Current Insurance Policy
  • Driver License Number
  • Vehicle Registration

Look for Discounts

Possible sources of discounts include a good driving record, your car’s safety or security equipment, and certain professional affiliations or occupations. There may be discount if you enroll in a company’s “pay as you drive” plan, or if you purchase car insurance through your home or life insurance provider.

Review Your Policy Before You Sign

Before you sign on the dotted line, read through your policy to ensure that there are no hidden caveats for how your coverage is provided. For example, some policies require you to use factory-new parts or only get repairs from dealership mechanics.

We also recommend checking on the company through the National Association of Insurance Commissioners’ Consumer Information Source, which lets you access information about insurance companies, including closed insurance complaints, licensing information and key financial data. You also can visit your state’s department of insurance to look at the company’s track record of consumer complaint ratios and basic rate comparison surveys, to ensure that you are not the victim of income-based discrimination.

Ted Oshman

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Ted Oshman has been with Oshman & Mirisola since 1988 serving clients for over 25 years. Learn more about Ted's background and featured practice areas here.

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