Study: Safe Drivers with Moderate Income Pay Vastly Variable Rates

By Trevor Dorchies | June 26, 2012
Finding car insurance for yourself or a loved one is about as fun as pulling off a band-aid or watching paint dry. It gets even better when you're shopping for a quote and get four different prices that differ by almost $1,000, and have different levels of coverage. If this scenario sounds all too familiar, don't fret because you're not alone. A recent study conducted by the Consumer Federation of America concluded that drivers with a good record and a moderate income pay high rates that vary greatly from one person to another. Consumer Federation of America is an advocacy group that stands for issues pertaining to health, housing, firearms, and of course, insurance. The advocacy group surveyed 15 cities which included Boston, Washington, Baltimore, Atlanta, Miami, Charleston, W.V., Louisville, Ky., Chicago, Sioux Falls, S.D., Denver, Houston, Phoenix, Las Vegas, Los Angeles, and Oakland, Calif. The four major auto insurance agencies, State Farm, Allstate, Progressive and Geico, were used to get quotes for the two test subjects, a 27 year-old single father of one, and a 35 year-old single mother of one. Each were hypothetically driving a 2002 Honda Civic that has been paid off and each log 10,000 miles a year driving. It was cultivated that if the fictitious female driver lived in Las Vegas, her premium ranges from $792 to $3,390. As for the male test subject, he was placed in Washington D.C. and was quoted a policy ranging from $1,335 to $1,738. It should be noted that the average policy for a male with similar traits in Washington D.C. is $591. A telephone survey was also conducted by the ORC that encompassed more than 1,000 adult drivers and it was discovered that 13 percent of those questioned knew someone who drives without an insurance policy daily. Those who drive without an insurance policy in the survey made anywhere from $25,000 to $50,000. Of those questioned in the telephone survey, 80 percent said they understand why people would drive without insurance simply because it's too expensive.
In response to the survey conducted by ORC, the Insurance Information Institute claims insurance rates fluctuate because of market competition and different methods used to assess risk. The Institute also claims that quotes are higher for those living in urban areas where automobile and health costs are usually higher. Still, advocacy groups like ORC believe the big difference in quotes show that companies don't judge risk properly and if the market was competitive, quotes would be closer in price. Do you pay a higher insurance premium because you live in a populated area? Vice-versa? Tell us about it in the comment section below. Source: New York Times