Survey Finds Insurance Companies Charge Black Drivers Living in Predominately African-American Neighborhoods 70% More for Auto Insurance
A new survey by a consumer advocacy group says some Black drivers are being charged up to 70 percent more than white drivers for auto insurance. A study by the Consumer Federation of America (CFA) revealed that drivers who live in predominately Black neighborhoods are charged higher insurance rates than drivers who live in predominantly white zip codes.
The CFA reviewed quotes from five insurance companies and found that white drivers were charged on average $622 per year, while drivers who lived in black communities paid $1,060, 70 percent more.
“These findings suggest a troubling pattern of high rates in African American communities regardless of driver history,” said Tom Feltner, director of Financial Services at the Consumer Federation of America. “We are not rushing to judgment about why this happens, but it is urgent that regulators, lawmakers, and the industry take a hard look at these findings and address the impact of high auto insurance prices on drivers living in predominantly African American communities.”
According to the CFA survey one of the biggest disparities was found in drivers in upper middle class communities. The survey found drivers in Black upper middle class communities paid an average of $2,113 per year for insurance, while drivers in white upper middle class communities paid $717. This represents a 194 percent difference.
Feltner told CBS News that socio-economic factors have more of an effect on insurance rates than your driving record.
“Moving traffic violations such as speeding and dangerous driving do impact rates for individual drivers, but our research shows that this effect is minor compared to the impact of socio-economic factors, like education, occupation and credit score,” he said.
Robert Hunter, director of Insurance for CFA, said the survey findings indicate that insurance companies are violating the law by charging Black drivers higher rates.
“In addition to mandating the purchase of auto insurance, virtually every state has laws forbidding unfair discrimination,” said Hunter, who is also an actuary and the former Insurance Commissioner of Texas. “The pricing disparities for state mandated minimum auto insurance coverage quoted to drivers in primarily African American communities are hard to fathom actuarially and look a lot like unfair discrimination.”
Insurance companies are not the only industry that has been found discriminate against Black consumers. According to CBS News, Black applicants were twice as likely to be rejected for home mortgage applications. An Atlanta Blackstar article reported several companies, including Honda and Fifth Third Bank, had been found to be charging Black customers higher interest rates for car loans.