Car insurance roulette: You could pay more because you’re a woman regardless of driving record
You could be a great driver but still have to pay more because of gender, ZIP code, other reasons unrelated to driving, a Sun-Times investigation found.
Looking for car insurance? Being a woman could add $370 a year to the quote you get even if you have a spotless record.
That’s according to a Chicago Sun-Times investigation that found you could be presented with an inflated price for automobile insurance for reasons that have nothing to do with your driving record.
Renting rather than owning a home, or working in an unskilled job could mean an extra $117 to $175 a year, the Sun-Times found. Living in the “wrong” ZIP code could mean an added $175.
For consumers unlucky to have a combination of factors that insurers see as negative, the result could be a price quote that’s $613 a year — 33 percent — higher than what their neighbors would be asked to pay.
And that was the case even when comparing people who have never had an accident and who own the same make and model of car, the Sun-Times investigation found.
Consumer advocates call the disparities unfair, especially given that auto insurance is required for anyone, including those driving to work or school.
“None of these things have anything to do with your driving history,” says Douglas Heller, an insurance expert with the Consumer Federation of America. To top it off, “Illinois does among the least when it comes to overseeing insurance practices.”
Consumer reporter Stephanie Zimmermann will hold a live Twitter chat to discuss her findings from noon to 1 p.m. CT on Monday. Follow Stephanie at @SZReports and use the hashtag #CSTinsurance.
Insurance companies say the prices they quote are based on their historical data.
“The variables that we select are predictive of whether or not you’re going to be in an accident, regardless of income level or ethnicity,” says James Lynch, chief actuary for the Insurance Information Institute, an industry research group.
To determine which factors could get you a pricier quote for auto insurance, the Sun-Times obtained more than 300 online price quotes, using addresses in neighborhoods around Chicago, from seven insurance companies. We found that:
- Gender discrimination is baked into pricing formulas of four of the seven insurers, which is legal in Illinois. The use of gender in determining car insurance pricing is specifically banned by seven states, including California, where a new anti-discrimination law took effect Jan. 1.
- Drivers who don’t own their homes often are asked to pay higher prices for their car insurance. Four insurers quoted higher prices for drivers who rent, rather than own, a home — even when the renter lives on the same block as the homeowner.
- Having the wrong job and less education can hurt you. Three insurers quoted higher prices to insure the car of a high school-educated retail worker compared to a college-educated teacher.
- People living just a block apart — but in different ZIP codes — were quoted rates that varied by up to $175 a year in some cases.
- And some insurers gave much lower price quotes to drivers on the North Side of Chicago than the South Side or the West Side even when presented with a potential insurance applicant with the exact same characteristics.
The differences were especially stark given that, for many Chicagoans, being able to drive is essential to upward economic mobility.
How we did the tests
The Sun-Times’ insurance price tests pull back the curtain on what’s historically been an opaque pricing system. Though insurers are required to file rate information with the Illinois Department of Insurance, the filings come in the form of hundreds of pages of algorithmic codes and numbers not easily understood by consumers.
By using the companies’ online price-quote tools, we were able to see how non-driving factors — such as gender, home ownership, occupation and location — can affect how much a consumer will pay.
In their ads, insurance companies practically beg consumers to take a few minutes to get an online quote. So the Sun-Times, running more than 300 tests, set out to investigate how much car insurance might cost for a driver in various parts of Chicago.
Each of the quotes sought was for a hypothetical single, 38-year-old driver who owns a 2012 Ford Taurus SE and has a perfect driving record. Our would-be insurance customer lives alone and drives about 10,000 miles a year.
Using house numbers no more than a block apart, as well as unique email addresses for each fictitious driver-applicant, we searched for price quotes, changing variables such as male versus female, homeowner versus renter, college-educated teacher versus high school-educated retail worker and homeowners living on either side of a ZIP code boundary.
We took the monthly price quotes and figured out what a year’s worth of coverage would cost.
All of the quotes covered bodily injury/property damage insurance, which is required to legally drive in Illinois. The quotes did not include collision coverage. Nor did they include comprehensive coverage for incidents like vandalism, car break-ins or theft — things that might be impacted by where you live.
Each of the price-quote websites includes a disclaimer that a driver’s credit history also will affect the final price. But even setting aside credit history, the Sun-Times found patterns of pricing differences by gender, home ownership, occupation and certain ZIP codes.
Price differences pile up
For example, Farmers Insurance quoted a female driver $327 to $370 more for yearly coverage than a male neighbor with otherwise the same characteristics and living on the same block in eight neighborhoods — ranging from North Center on the North Side to West Englewood on the South Side.
GEICO quoted a female driver between $83 and $98 extra per year in various neighborhoods around Chicago.
Progressive and Nationwide had a lower gender gap but still quoted a female driver about $60 to $64 more annually.
State Farm had no difference in prices for women and men. And Allstate bucked the gender trend, quoting a male driver about $18 more a year.
For a driver who rents her home, four insurers added between $60 and $175 a year to their price quotes — even when the renter lives on the same block as an otherwise-similar homeowner.
Farmers again had the biggest discrepancy here, with renters quoted between $152 and $175 more a year than homeowners. GEICO added between $73 and $91 for renters. For Progressive, it was $72 to $78 more.
Three companies penalized a blue-collar woman by quoting a high school-educated retail worker a higher price for car insurance than it did for a college-educated teacher, even though all of the quotes were for women who own their homes and drive the same type of car.
For example, Liberty Mutual added about $117 a year to the retail worker’s quote on the 6700 block of South Artesian Avenue in Marquette Park.
The prices kept going up as we changed more socioeconomic variables.
For instance, in the 2700 block of North Hamlin Avenue in Logan Square, Farmers quoted a female retail worker who rents her home $278 more a year than a female neighbor five houses down who is a teacher and owns her home.
In the same neighborhood, Farmers quoted a female retail worker who rents her home a whopping $613 more per year than a male teacher who owns his home.
Drivers caught on the unlucky side of a ZIP code boundary got higher price quotes, too.
In East Garfield Park on either side of Kedzie Avenue, for example, the Sun-Times tested addresses in the 3100 block of West Walnut Street, which is in the 60612 ZIP code, and the 3200 block of West Walnut Street, which is in 60624.
The 60612 ZIP code to the east is about 60% black, 20% white and 15% Hispanic, and 60624 to the west is about 94% black, 3% Hispanic and 2% white.
Price quotes came out higher in 60624: by $162 per year with GEICO, $158 with Farmers and $104 with Allstate — though the homes were just a block apart.
And the quotes often were higher on the South Side and West Side than on the North Side. For example, the GEICO tests had a female teacher and homeowner quoted $791 per year in Lakeview on the North Side but $1,097 in East Garfield Park on the West Side and $1,045 in Longwood and Brainerd on the South Side.
With Farmers, that same hypothetical driver was quoted $2,138 in Albany Park on the North Side and $2,380 in West Englewood and $2,247 in Marquette Park.
Some residents of neighborhoods where price quotes were higher expressed shock at the differences.
China Whigham, 20, says basing prices on non-driving factors is just wrong.
“Everybody should be charged equally, especially if you have no accidents, and you have a good driving record,” says Whigham, who lives and works on the West Side.
Fatima Ortiz agrees. Car insurance should be based “on how safe you drive,” says Ortiz, who lives in Chicago Lawn. “If I’m paying more, it’s not fair at all. I’m a safe driver.”
Heller, of the Consumer Federation of America, says that when insurance companies “slice and dice” their data, it has a cumulative effect on low-income consumers, who might find themselves on the short end of several non-driving factors.
“The fact that you’re a good driver becomes overwhelmed by several different proxies for your income,” Heller says.
‘Kicking people when they’re down’
Consumer advocates have pushed for years to remove non-driving factors from car insurance prices. Their argument: Car insurance is mandatory for drivers. People can’t legally choose to go without it, as they might with cable TV if the bills get too high.
And when non-driving variables like homeownership, occupation, education or credit history help determine premiums, the result is higher prices for consumers who’ve been economically damaged for years, says Brent Adams, senior vice president of policy and communication at the Woodstock Institute, a nonprofit organization focused on lending and finance for low-income people.
How to lower your premium
- Use several insurers’ online quote tools to find your best options. Take care to note the level of coverage.
- Don’t be too loyal. Some insurance companies use data to predict whether you’re likely to stay with them, even after a price increase. If you shop around, they might give you a better deal.
- Don’t let your insurance lapse. And avoid nonstandard insurance if you can. Both will result in higher premiums later.
- Consider bundling auto insurance with homeowner, rental or life insurance to take advantage of discounts.
- Look for discounts you may be entitled to through membership in a union, fraternal organization or other group.
- Consider opting in to your insurer’s “telematics” device or app (think Snapshot by Progressive or Drivewise by Allstate), which might lower your rate if you’re a good driver. But first decide whether you feel comfortable giving up privacy for a discount.
“It’s perpetuating inequities based on race and income that were formed by inequitable decisions decades ago,” Adams says. “It is kicking people while they’re down in a whole host of ways.”
Abe Scarr, state director for the advocacy group Illinois Public Interest Research Group, says it’s “discriminatory and unacceptable” to base premiums on non-driving factors.
“Car insurance prices should be solely based on people’s driving records and objective risk factors,” Scarr says. “Driving record is not only the single most accurate indicator of risk, it is also the fairest and least discriminatory factor that can be used in setting individual rates.”
Pricing studies by the Consumer Federation of America over the past decade have documented similar disparities around the country. Its tests have found that drivers in lower-income ZIP codes or who have lower credit scores, less education, lower-status jobs or a car loan or who aren’t married or who rent their home often pay more for car insurance — even if they are good drivers.
In 2016, the consumer group’s testing found that in 10 cities including Chicago, drivers of modest means with a perfect driving record got higher price quotes than wealthy drivers who had a past DUI charge or accident history.
Insurers: More rules might mean less choice
The insurance industry didn’t dispute the Sun-Times results but argues that its prices are based on data and don’t reflect any sort of discrimination.
By law, insurers can’t use race, ethnicity or religion in setting prices.
Any variation in pricing is justified by the companies’ historical data showing how much risk a given group of drivers poses, according to David Snyder, a vice president of the American Property Casualty Insurance Association, which includes GEICO and Progressive among its 1,000-plus members.
Snyder says the fact that some companies charge more for certain characteristics and others don’t demonstrates that Chicago is a healthy market.
“Some companies use certain factors; other companies don’t,” Snyder says. “It just illustrates a highly competitive market. Just turn on the TV every night, and you can see the competition.”
Insurance companies divide their business into territories — typically by ZIP code — and study the claims and litigation history for each area, according to Snyder.
That data is filed with the Illinois Department of Insurance, and the insurers are subject to what are called market-conduct examinations.
“Obviously, folks right on the [ZIP code] line have an option,” Snyder says. “They can shop around.”
In statements provided to the Sun-Times, spokesmen for Farmers, Liberty Mutual, Nationwide and State Farm say they look at a wide range of variables when setting insurance rates. Allstate declined to comment, and GEICO and Progressive opted to have their association speak for them.
“Because there is such a diversity in the factors used to calculate a driver’s rate, we encourage consumers to speak with a local agent to assure they are getting details about all of the discounts they may be eligible for,” Farmers’ statement said. “It’s also important to note our rates are based on actuarial loss results that have been filed with the Illinois Department of Insurance.”
Lynch, of the trade group the Insurance Information Institute, says pricing criteria for auto insurance must have “statistical validity.” Viewing any single characteristic, such as gender or home ownership, in isolation is a mistake, according to Lynch. He says insurance companies consider hundreds of variables and see how they interact to produce models of risk.
“Insurance companies have to be fair. By law, we have to be fair,” he says.
Lynch says that if states move to limit the factors auto insurers can consider for pricing, insurers might stop offering coverage in areas they deem unprofitable and safe drivers might end up being charged more to offset lowered rates for drivers who are a higher risk.
“If a state restricts too many rating variables, there can be unfortunate consequences,” Lynch says.
Illinois is known for its relatively light insurance regulation. For example, auto insurers here are allowed to implement rate increases before they file documentation with the state, rather than having to wait for prior approval.
The industry argues that less regulation results in greater competition and, if consumers are diligent about shopping around, lower prices. Illinois’ car-insurance rates generally fall in the midrange of the country.
Other states clamping down
Several states have taken non-driving factors out of car insurance. California, Massachusetts and Hawaii bar the use of credit histories in setting auto insurance premiums. New York prohibits using education level or occupation in determining premiums.
California, Massachusetts, Hawaii, Montana, Pennsylvania and North Carolina prohibit the use of gender as a factor — as does Michigan for certain segments of its insurance market.
California’s anti-gender discrimination rule took effect Jan. 1. In imposing that, the state’s insurance department said, “Gender’s relationship to risk of loss no longer appears to be substantial.” It described the statistical basis for gender-based price differences as “suspect.”
Illinois State Sen. Jacqueline Collins, D-Chicago, has tried for the past few years but failed to pass legislation barring the use of credit history or ZIP codes in car insurance premiums.
“ZIP codes and credit scores are really proxies for race and class,” Collins says. “And if you can’t afford the insurance on your car, you can’t get to work.”
Collins says she’s “not surprised at all” by the Sun-Times’ findings but says banning non-driving factors in Illinois will be a battle: “The insurance lobby is very strong, and they fight very vociferously to keep the legislation from getting out of committee.”
The Illinois Department of Insurance declined to make anyone available for an interview, instead issuing a written statement saying it works to ensure there is no discrimination “by reason of physical handicap, race, color, religion or national origin. We welcome conversations with legislators on any additional regulations that could help us better protect consumers.”
A move to personalize prices
Several insurers are turning to more individualized systems to set auto insurance prices. With names like Snapshot, SmartRide and RightTrack, these “telematic” systems use a transponder in a car or an app on a phone to see how customers actually drive. A lot of miles with hard braking, left turns and speeding on crowded highways could result in a higher premium, while safe and smooth driving can result in a lowered rate.
Risk is still pooled among many drivers, but, with more individualized data, “the accuracy of risk assessment will get better,” Snyder says.
But consumers have been slow to embrace telematics, according to Lynch, who says insurers have to make sure the costs of collecting and sorting that data is worth it.
“Insurance companies are very excited about the use of telematics,” he says. “We’ve been a bit surprised that they haven’t been adopted at a higher rate.”
Consumer advocates say there’s an allure to getting a price tied more directly to driving. But they also say they have privacy concerns regarding what kinds of data could be scooped up — such as where, when and why a person is driving to a particular destination.
“We have some concerns that they’re tracking much more than is needed,” the consumer federation’s Heller says.