Are Car Insurance Rates Determined Unfairly?
Numerous evidence abounds supporting the claim that car insurance rates are determined unfairly. Some widely-known discriminatory practices include youngest and oldest drivers paying more for coverage even if they are better drivers than mid-aged motorists; and women paying less than men for identical policies. Same-sex couples also cannot take advantage of the “married” discount. However, car insurance companies openly disclose these discriminatory practices yet shy away from admitting that they calculate other car insurance rates based on race and credit rating.
The Race Factor in Car Insurance Rates Determined Unfairly
Once commonly known as redlining, the car insurance industry’s precedent of giving higher rates to residents of racially determined living areas is no longer standard practice. Instead, say consumer advocate groups, car insurance companies now charge racial minorities elevated rates based upon their credit scores.
This begin in the early 1990s, when the credit scoring company Fair Issac & Co. (FICO) heavily marketed their services to car insurance companies desperate to find ways to raise their insurance premiums. FICO’s ability to show a direct correlation between particular credit risks and escalated insurance risk sealed the deal. In other words, FICO proved that if you have bad credit, you are more likely to engage in risky behavior, and even commit outright fraud.
Where does race fit into car insurance rates determined unfairly? Because racial minorities in the U.S. tend to use “alternative financing,” loans or mortgages granted to people with less-than-perfect credit. Since their credit scores are lower than the general population, whose credit is good enough to secure standard bank mortgages and loans, racial minorities often pay more for car insurance than non-minorities with good credit, explains consumer advocate groups.
The More Fraudulent Factor in Car Insurance Rates Determined Unfairly
A recent survey performed by the U.S. Government Accountability Office (GAO), a congressional “watchdog” group found that 2/3 of policyholders did not know that their credits were a factor in determining their car insurance premiums. Most companies simply use the standard, silent FICO score formula to determine your rate without ever sharing this information with you. You sign what appears to be a standard quote form.
However, it is actually a consent to check your credit. Still others use more covert tactics to turn your neutral or positive past claim filing status to hit you with a higher car insurance premium. Did you know that you might pay a higher car insurance rate simply for being reimbursed for being hit by another car? Ouch!
What You Can Do About Car Insurance Rates Determined Unfairly?
If you are a new driver, a senior-citizen, or a racial minority member who uses alternative financing, you need to take the time to shop around to get the biggest bang for your buck. Luckily, just about every car insurance company in business utilizes different premium-calculation methods, so you can save a ton of money just by acquiring a list of comparative quotes.
For example, Consumer Reports found that one customer who had a neutral credit score, neither good bad, had identical car insurance policy premiums with two different companies during one period of his life. However, as soon as he made a major purchase, Company A wanted to raise his premiums by 29 percent, while Company B wanted to raise his rates a whopping 47 percent!
Car Insurance Quotes
Find out which company is charging you fairly for your credit rating, and which company is heavily taxing you for a common life milestone –such as buying a new home, vehicle or expensive, well-deserved play toy. Enter your zip code at MyCarInsuranceRates.com to receive the adequate coverage you need to protect yourself from an unexpected accident, and cheaper car insurance rates that won’t bust your budget. You don’t have to pay more for the best coverage, you just need to know where to find the best coverage. Start comparing online quotes to find the best car insurance for your needs.
