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Nonprofit group highlights auto insurers’ unfair rate-setting practices, P.1

Insurance is a valuable commodity, and one that is a practical necessity for most people. As consumers of insurance products, we expect that we will be treated fairly, that we will be charged a fair price based on accurate risk figures, and that insurance companies will not be allowed to defraud consumers by taking advantage of their lack of knowledge about rate setting.

Unfortunately, consumer advocates have long suspected that there is a significant lack of justice in how insurance companies set rates, particularly among auto insurers. According to a recent report by ProPublica, insurance companies routinely charge those who live in minority neighborhoods more for car insurance than those who live in wealthier neighborhoods. This is the case despite the fact that most states have laws prohibiting discriminatory rate-setting.

Insurance companies justify premium disparities by pointing to differences in risk, and say that these differences are not based on race or ethnicity, but critics say there is little basis for the practice based on the data. ProPublica based its findings on an examination of data in four different states, including California, which it claimed to be the most heavily regulated insurance market in the country. Over 100,000 premiums for liability insurance were examined for 30-year old women with safe driving records in different zip codes. In California, the analysis looked at state data for insurance claims received, as well as payouts, by state insurers over a five-year period. In every state, serious differences were noticed with premiums charged for those coming from minority and non-minority neighborhoods.

In our next post, we’ll continue looking at this story, as well as the need for consumers to work with an experienced attorney to defend their legal rights when they suspect their insurance carrier may be doing wrong by them. 

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