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Study Shows Low To Moderate Income Drivers Pay More For Auto Insurance

It’s illegal to base insurance rates on a consumer’s income, but it appears that low income drivers are at a disadvantage when it comes to getting a deal on auto coverage.  A report released by the Consumer Federation of America (CFA) says that people in low to moderate-income brackets are paying considerably more for car insurance than those with higher incomes. 

The report reached its conclusion after reviewing insurance pricing among more than 100 insurance companies. The results showed that not only do consumers in lower income brackets pay more for the same amount of auto coverage than people with a higher income; they also pay more for significantly less coverage.  The study also shows that in metropolitan areas, policies purchased in low income neighborhoods cost anywhere from 8% to 94% more than in affluent neighborhoods in the same metro district. Another aspect of the survey reveals that auto coverage on average costs 40% more for low education consumers who work in less skilled occupations than their more highly educated, highly paid counterparts.

In response to the report, a spokesperson for the Insurance Information Institute stated that even though insurance companies collect information on a consumer’s education, job status, whether they own or rent their home and their place of residence, the primary factors that figure into pricing are their driving record and credit history.  They say that the information they collect helps companies accurately gauge the amount of risk, and thus the cost of insuring drivers. 

The CFA says that insurance companies aren’t required to divulge how they distribute the information they collect into their pricing structure, so there’s no accurate way for consumers to know why they’re charged the rates they end up paying.  The fact is that lower income drivers can end up paying as much as $1,000 more annually for coverage, which adversely affects their ability to make ends meet and creates a financial hardship in areas where people need to drive to get to work. 

For now, there’s little that low to moderate income drivers can do to ensure they get the best deal possible on auto insurance except to shop around, keep a clean driving record and maintain a good credit rating.