New Data Reveals Significant Discrimination in Auto Insurance Rates

Discrimination in car insurance rates was an issue raised by many IABG coalition members at our recent convening. To close the racial wealth divide, we have to address disparity in all financial products and practices – including in car insurance.

A new analysis by ProPublica and Consumer Reports has found that communities of color in Illinois pay significantly more for car insurance than white communities. While the racial and socioeconomic discrimination in auto insurance prices has been shown time and time again, this new data debunks the insurance industry’s myth that the difference in prices between white communities and communities of color is due to a difference in the risk of car accidents in those neighborhoods.

In Illinois and especially in Chicago, the discrimination based on zip code that causes communities of color to pay more for car insurance is particularly egregious – amounting to a modern day form of redlining. Of the 34 companies in Illinois analyzed by Propublica, 33 of them were charging at least 10 percent more, on average, for the same safe driver in zip codes with predominantly people of color than in similarly risky white zip codes. Six Illinois insurers, including Allstate – the second largest insurer in the state – had average disparities higher than 30 percent.

 

GEICO Casualty Company Premiums in Illinois

On top of this, car insurance rates are too often unaffordable for low- and moderate-income families. Kelley Jenkins is a participant at Heartland Human Care Services, and ProPublica highlights her experience struggling to afford car insurance:

Consider Kelley Jenkins, a 39-year-old mother of three who lives on Chicago’s South Side. When she was laid off from an office job last summer, she tried to make ends meet by driving for Uber and Lyft. But after two months of sporadic driving, when she was sometimes making only $100 or $200 a week, she couldn’t afford to keep up her $112 monthly auto insurance payments. “I was in a major struggle,” she said.

When she gave up her auto insurance, she lost her driving gigs. Luckily, she soon found a job as a security guard. But she still can barely afford auto insurance, so she bought a bare bones plan from a low-cost insurer.

Jenkins said she would love to get insurance from one of the brand-name companies, but every time she calls for a quote, she realizes, “Oh no, I can’t afford it.”

It is time that we put an end to this redlining practice, which jacks up the prices of car insurance and strips wealth from communities of color. IABG is supporting legislation (SB1706) introduced by Senator Collins that will help end discrimination in car insurance rates. In response to this new data, a new piece will be added to SB1706 that will prohibit discrimination in car insurance rates based on race and zip code. This legislation is critical to address the racial wealth divide in Illinois, and we urge lawmakers to support it.

Join the conversation on Twitter using the hashtag #FixCarInsurance.

Read the full ProPublica article, and learn more about our consumer protections work.

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