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Being a Safe Driver Doesn’t Always Mean Lower Rates

This may come as a surprise to those of you with good driving records, but being a safe driver doesn’t always mean lower insurance rates. How can that be? Well, as you’re probably already aware…many factors go into the calculation of auto insurance rates. Things such as driving history, place of residence, credit score, and age are all, more or less, used to determine the price you’ll pay for your policy. And, while it’s assumed that safe drivers are often charged the lowest possible auto insurance rates available – this is not necessarily the case.

According to the Consumer Federation of America, a consumer advocacy group, and the study they conducted – auto insurance rates are not actually lower for the substantial number of so-called “safe drivers” out there. Although many drivers with good records typically have the added advantage of lower rates on their coverage, those who fall into certain demographics, in reality, pay much higher rates.

Creating two hypothetical motorists in 12 different cities within the U.S., which represented 60 case studies, the Consumer Federation of America discovered some interesting facts. Apparently, in more than three-fifths of the cases studied, drivers who had accident-free records were being charged 25 percent more for their insurance coverage than those with poor driving records.

As it turns out, demographic information provided by the CFA for their fictional motorists greatly influenced the cost of their auto insurance. Both were 30-year- old women with 10 years of driving experience behind the wheel. While the two women were in the same middle-income bracket, the first motorist had no accidents, had only a high school education, worked as a receptionist, and rented an apartment. On the other hand, the second driver had an at-fault accident on her record, but owned a home, and held a Master’s Degree.

The study showed the first driver was regularly charged rates of more than $1,000 in the majority of the cases, while the rates for the second fictional motorist were only as high as $850 for the same auto insurance policy. As a result of the in-depth research by the Consumer Federation of America, the discrepancy between what is fair and unfair in determining the cost of auto insurance has been brought to the forefront.

Having exposed this practice, the consumer group is now pushing for auto insurance reform, but the battle will be a hard-fought one. Insurers suggest and openly admit that education and income levels are used as actuarial factors when assigning a price for an individual’s auto insurance coverage. However, the Consumer Federation of America is arguing the opposite – that the use of demographic information is unjust and is pushing for insurance regulators across the country to prohibit the use of such information. The CFA has proven that demographics are not foolproof evidence that a motorist with the lower test criteria will automatically be a worse driver.

Thanks to prior efforts by such groups as the Consumer Federation of America, in many states, insurers are already barred from being able to use gender to dictate what auto insurance rates you’ll pay. And, that’s a step in the right direction.

Another step in the right direction is making sure you’re getting the best rate on your auto insurance. Why not get a free auto insurance quote today?

Do you think the use of demographics is a fair way to determine auto insurance rates? Feel free to share your thoughts in the comments section below.