Do Insurance Companies Discriminate?
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UPDATED: Mar 13, 2020
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There are laws in place to protect consumers from discrimination. From employers to apartment complexes, an individual cannot be turned away from service due to gender, race, religion or disabilities. The same holds true for car insurance. All people should have equal access to auto insurance policies at similar rates. Unfortunately, some people have a harder time finding a policy than others, and the high cost of coverage for some people can feel discriminatory.
In the case of auto insurance, premiums are determined by statistics. People who are at a high risk of being involved in a collision will have higher premiums regardless of their protected minority status or anything else. In some cases, these risk factors overlap with other factors, causing a sort of discrimination-by-proxy: The insurance company isn’t purposely charging higher premiums to minorities, it’s simply a side-effect of the way statistics are gathered.
Insurance and Gender
One area where insurance companies aren’t shy about possible discrimination is gender. It’s a well-known fact that auto insurance companies charge higher premiums to men than women, and there is substantial evidence to support the claim that women are involved in fewer collisions each year than male drivers.
The disparity between genders is most pronounced in young drivers. Males under the age of 25 have the highest likelihood of any age group of dying in an auto collision. Even as they age, single men get involved in more collisions than married men, and their premiums increase accordingly.
Insurance and Race
The link between the cost of auto insurance and a driver’s race is more tenuous than for gender, but many minorities nevertheless find themselves paying more for auto insurance than people of the same age and gender of a different race. This is an indirect result of the insurance company’s reliance on statistics, and it has more to do with a driver’s income than their race.
Unfortunately, many minorities have lower incomes than others due to various circumstances. These low incomes often result in poor credit as well, and while insurance companies cannot discriminate based on socioeconomic status, they can certainly increase rates due to poor credit. Drivers with bad credit are viewed as more likely to file claims and less reliable in general, leading to an increase in rates.
Additionally, the neighborhood where an individual lives also plays a role in determining the cost of coverage. Neighborhoods with a high crime rate will cost more for insurance due to the increased likelihood of the vehicle being stolen or vandalized. Of course, not all minorities live in poor neighborhoods, but there is often a correlation between race, income and the quality of a neighborhood.
Insurance and Disability
Drivers with disabilities are often required to purchase additional insurance coverage in order to compensate for the cost of their customized vehicles. For example, a vehicle may be fitted with hand controls and ramps to accommodate wheelchair-bound drivers. All of these modifications translate to higher premiums. In this respect, a driver with disabilities will not automatically pay more for insurance, but the modified vehicle itself will be more expensive to insure.
In some cases, drivers with disabilities may pay higher premiums due to increased risk. For example, if a person has a medical condition such as epilepsy that has caused a car accident in the past, their driving record will be affected and the insurance company will compute their risk accordingly.
Insurance companies do not differentiate between collisions caused by medical conditions, so even if the health issue has been resolved, the insurance company may continue to charge higher rates due to a perceived increase in the driver’s risk.
Because car insurance prices are determined by multiple factors, it’s often impossible to tell what may be influencing the cost of your policy. In most cases, a complicated balance is struck between a driver’s history, the type of car being driven and all of the statistical factors that cause premiums to rise; no single factor should have a damning influence on the cost of coverage.
Always Comparison Shop
This is why it’s so important to comparison shop between multiple auto insurers. Different insurance companies weigh various factors differently, so people with high rates with some companies may have much lower premiums in others. For example, one company may value credit scores more highly while another places more emphasis on the age of the driver.
By comparison shopping, you can find the company that will best fit your needs for a price that you can afford. Once you’ve chosen an affordable company, you can reduce the cost of your insurance further by applying for any discounts that you available to you. This will help counteract the effect of any statistical elements that may count against you.