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Car insurance companies are allowed to base their rates on someone's gender, age, marital status, and even zip code. But for some reason race is not part of the equation. So a young man who is single will pay higher rates than a married woman.
Are you aware that car insurance companies are not governmental institutions?
As long as they don't violate state regulations they can assess risk any way they want. However, as per numerous court decisions, they - nor any other company - may not discriminate based on race.
If their data show that young single men have higher claim rates than middle-aged married women, they charge higher rates to the former. Believe me, if their data were to start showing that young single men had LOWER claim rates, they'd either cut the premiums to them, and heavily advertise the fact to take market share from their competitors, or they'd raise the premiums to the married middle-aged women. You know, they're in business to make money, not to provide charity.
I think you ought to think a bit about how insurance companies operate, what are their sources of revenue, what are their expenses, and how they go about making a profit.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Insurance rates are based on historical claim data, with a lot of number crunching using demographics, credit scores, crime, and more. Young and single people are not a protected class, nor are people with a lousy credit score, or those with a lot of tickets or accidents. All of that is perfectly legal to use in determining rates. It's basically legal discrimination. Now if a company charged Blacks, Asians or Hispanics more based on race, it would be illegal, but for car insurance they may not even know the customer's race if all is done by phone or online.
As long as they don't violate state regulations they can assess risk any way they want. However, as per numerous court decisions, they - nor any other company - may not discriminate based on race.
This is the part that doesn't make any sense. Why are car insurance companies allowed to use gender and age to calculate rates but not race? All are forms of discrimination but somehow one is okay and the other is not.
This is the part that doesn't make any sense. Why are car insurance companies allowed to use gender and age to calculate rates but not race? All are forms of discrimination but somehow one is okay and the other is not.
Are you being deliberately obtuse or do you really not understand the concept of risk related premiums and underwriting?
"There seems to be full agreement among the leading theoreticians in the field that the insurance premium should reflect both the expected claims and certain loadings. This is true for policy, risk or portfolio. There are three types of positive loadings: a) a loading to cover commissions, administrative costs and claim-settlement expenses; b) a loading to cover some profit (a cost-plus approach) ; and c) a loading for the risk taken by the insurer when underwriting the policy. The administrative costs can be considered a part of "expected gross claims". Thus, the insurer's ratemaking decision depends on his ability to estimate expected claims (including costs) and on the selection of a fair risk loading."
"While no two individuals are exactly the same, many people exhibit similarities that allow them to be classified. Insurance companies need to know the likelihood that underwriting a new policy for a new client or business will be a profitable endeavor.
After all, taking on a new policy for several hundred dollars a year won't be a good idea if the policyholder winds up creating thousands of dollars in claims.
In the case of auto insurance, for example, an insurer may examine the age of the vehicle, the age of the driver, the driver’s history, the amount of coverage requested, and the area in which the vehicle is operated. These factors, when taken together, create a profile of a specific type of driver, which can be used by actuaries to determine how drivers in this particular profile act."
This is the part that doesn't make any sense. Why are car insurance companies allowed to use gender and age to calculate rates but not race? All are forms of discrimination but somehow one is okay and the other is not.
It is not considered illegal discrimination when supported by cost data. That is why many insurance products are allowed to used classifications to determine rates. I would assume the broadest classifications are gender and age and they are large enough that the rate is not cost prohibitive. Narrower classifications, i.e., race are much smaller groups and it could be cost prohibitive.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
44,551 posts, read 81,085,957 times
Reputation: 57739
Quote:
Originally Posted by lepoisson
This is the part that doesn't make any sense. Why are car insurance companies allowed to use gender and age to calculate rates but not race? All are forms of discrimination but somehow one is okay and the other is not.
Actually, in our state (Washington) during Covid the insurance commissioner decided that using credit score in determining rates was having too much impact on the poor and minorities who were in fast food and hospitality, and not working during lockdown. So, he temporarily banned it. The result was that the car insurance rates for people like us with good credit went up as much as 25%. In late August, 2022 the courts overturned that rule, but guess what? The rates still went up even higher in 2023.
Location: In a perfect world winter does not exist
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In WA state it's ridiculous. I have close to 800 credit. No tickets or accidents past 3 years and only one insurance company was reasonable cost. Progressive. The rest quoted me prices close to when I was a teen.
We should move to a system where one's employer is expected to pick out and pay for the car insurance, and if you happen to not have a good job that provides good car insurance, then too bad for you.
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