Job and Education Affect Car Insurance Rates

Auto insurers commonly use profiling techniques to determine personalized insurance premiums for individuals. However, insurers have been branching out from their usual, accepted profiling areas in order to supposedly give even more specific quotes. These practices have potentially crossed the line into discrimination. Someone’s job and education level may affect their car insurance rates.

Car Insurance Profiling

Common sense dictates that certain factors about someone will determine how much of an insurance risk they will present, and that these factors can be used to determine how much to charge for premiums. The normal range of data for profiling a client includes their age, driving history, state, specific address, gender and the make and model of the vehicle being insured.

All of these have proven themselves as accurate indicators of a person’s risk: younger and older people get into accidents more often than those in the middle age ranges, and certain areas have higher risks of theft, etc.

Changing Times

In the past decade it has become increasingly common for auto insurers to use a person’s consumer credit report as well as their driving record to assess their insurability. The justification for this is that an individual with poor credit is more likely to default on payments and generate other risks.

Other controversial new trends in car insurance profiling include using someone’s occupation and even educational level to further gauge their risk element. To some, it is as if the insurer is implying that a college graduate deserves cheaper car insurance than someone who didn’t get a degree.

Setting Historical Precedent

In the beginnings of car insurance, customer profiling was non-existent. Everyone got the same rates regardless of any other factors. However, this changed after the Great Depression, when auto insurers began classifying farmers, soldiers and other blue-collar workers as being too risky to insure cheaply because of their financial hardships. These people began joining together to found their own car insurance companies. Auto insurance carriers began assessing risk on actual demographics as years went by, and statistics began emerging clearly that certain groups are, indeed, riskier for auto insurance.

Good Sense or Discrimination?

Although it is logical to agree with some of these statistical analyses the question has to be asked, where is the boundary between logical profiling and discrimination? In the 1970′s auto insurers practiced something called “redlining,” where they would basically draw a red line demarking higher-crime urban areas—which frequently had more predominantly African-American or Latin American populations—and charging higher rates inside those red zones. Although this is illegal now, it still exists in principle with the intensifying economic and social profiling practices used by insurers.

Backlash

Many consumer protection groups and government officials believe the practices of using credit scoring, education and occupation to assess insurability is indeed discriminatory. Recently the legislatures of several states, including New Jersey and Rhode Island, have tried to strike down these practices in law. The proposed bills were defeated narrowly, but they are being re-written to be presented again in the future. Until the usage of such personal information is done away with entirely, people need to find out how their information is used and even shared by their auto insurers.

Court Opinions

U.S. courts have taken a divided stance on these issues. With the redlining practices of decades past the courts stated that the application of redlining levied a “disparate impact” on the groups involved, and that it was definitely racial and economic discrimination.

Now, however, the courts have stated that judging drivers by age and sex is allowable, because these are demonstrably accurate indicators of risk. However, by extending that consideration to economic factors many courts believe that the “economic” status is implied for “racial” status and as such is discriminatory.

Get Cheap Car Insurance Rates

It is impossible to know what every company uses to decide car insurance rates, so it is wiser to spread out your search. This can be done through a simple auto insurance quote comparison, which will allow you to find a more affordable policy. Enter your zip code to begin a car insurance quote now.


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