Insurance Companies Often Charge Good Drivers Too Much For Coverage

Oct 06, 2014 05:00 PM EDT | Matt Mercuro


A number of insurance companies may be charging good drivers too much money for coverage.

A Consumer Federation of America analysis of 81,000 premium quotes from Allstate, Farmers, Geico, Progressive, State Farm, and their affiliates shows that none offer a basic auto insurance policy to safe drivers in 50 large urban locations for under $500 per year.

In almost half of those places, there was at least one predominantly lower-income zip code area where those insurers charged drivers over $500 for basic yearly premiums, according to a CFA press release.

Car insurance prices in all of the lower-income zip codes in nine of the 50 urban areas were over $500 as well.

"Our research raises important questions as to whether state-mandated auto insurance is priced fairly and is affordable for many lower-income Americans," Tom Feltner, CFA's director of financial services and the report's principal author, said in a statement.

"Drivers need a car to get to work or school," he continued. "High insurance premiums act to deny these Americans economic opportunity and also help explain why so many lower income Americans drive without insurance."

Since 2010, the consumer group has tracked the price of average auto insurance premiums for normal, moderate-income safe drivers. Insurers quote those drivers premiums of well over $500 annually, and often in the $1,000 or above range, the group found.

CFA reported that insurers offered price quotes on a policy without obtaining information about a driver's credit score, according to the release. It used other factors instead, like education and occupation, which "tend to disadvantage low- and moderate-income drivers".

Feltner said that many lower-income drivers aren't able to shop around for the lowest-price insurance. Around two-fifths of those drivers often have to purchase collision and comprehensive insurance when financing their cars, as well as liability coverage, which increases costs.

Auto insurance is required across the country, with the exception of New Hampshire.

The Treasury Department's Federal Insurance Office estimates that around 14 percent of motorists nationwide were uninsured between 2002 and 2009.

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