Do You Think You Pay Too Much For Car Insurance?

The Consumer Federation of America (CFA) reports what many of us have suspected: good drivers and low-income wage earners generally pay more for car insurance. The national survey draws vehement disapproval from consumers over how auto insurance companies calculate rates, using education and income to influence costly premiums. Consumers object to the use of non-driving factors frequently used to price auto insurance.

On credit monitoring sites like, users can find an “Auto Insurance Score” that looks similar to a three digit credit score. According to Credit Karma’s Blog the scores are used by 15 of the largest auto insurers including Allstate, GEICO, and Progressive. The score is assessed as a credit-based insurance score meant to theoretically predict the likelihood of filing a claim.

When these scores began being used more mainstream by insurance companies in 2007, the National Conference of Insurance Legislators (NCOIL) Model Act regulated the used of credit information. NCOIL prohibits calculating insurance based on factors such as income, gender, zip code, ethnicity, and marital status in some states.

MSN Today reports the insurance industry rejects any notion that it discriminates in any way when assessing premiums for customers.

CFA provided a comparison of premium scenarios. The assessment example revealed the majority of single females, who work a clerical based position, and rent their home pay far higher premiums for their car insurance versus a married female homeowner, with a college degree, and a professional career.

Auto insurers use credit information to help set your premium. Legally they cannot base your premiums solely on your credit profile. They also consider factors including driving record and market demographics. Yet flashy television ads tell us otherwise. Consumers are told over and over again how good drivers pay less, however that is not always the case.

Law-abiding, cautious drivers are not given much incentive in terms of rates if they didn’t go to college or earn less money. The concept contradicts the similar ideologies of study hard and earn good grades, overpaying credit card bills on time will keep your interest rates down, or people who eat right and exercise always lose weight.

Drivers are required to have minimum coverage insurance, but they do have the option to comparison shop for another insurance company if they feel their rates are unjustifiably high.

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