Insurers accused of charging drivers in minority areas 30 percent more
US car insurers have been accused of charging drivers in minority areas up to 30 percent more for car insurance premiums compared to similar risk areas with predominantly white residents. What happened Car insurance companies in several US states, including Illinois, Missouri, and Texas, were found to be charging significantly higher premiums to drivers living in minority zip codes compared to those in white areas with similar accident costs. The analysis showed that 33 out of 34 insurers in Illinois charged rates at least 10 percent higher in minority zip codes, with six companies charging 30 percent or more. This pricing disparity resulted in an average annual premium gap of USD 326 between Black and white drivers. Why it happened Insurers defended their pricing by claiming higher risks of accidents in minority neighborhoods. However, the investigation found that the disparities in premiums were wider than differences in risk could explain. Other factors such as socio-economic characteristics, credit scores, and ZIP codes were also used in determining premiums, which disproportionately affected minority and low-income drivers. What it means The practice is seen to have severe implications for minority and low-income communities, placing a significant financial strain on those least able to afford it, and forcing some to choose between insurance and other necessities. Furthermore, the inability to pay for insurance can lead to fines, licence suspensions, and even jail time, limiting economic opportunities and social mobility. More broadly, b y charging higher rates to those already economically disadvantaged, the practice exacerbates existing wealth gaps between minority and white communities. System 🤖 Developer: Geico; Safeco; Nationwide Country: USA Sector: Banking/financial services Purpose: Assess risk; Determine price Technology: Pattern recognition Issue: Bias/discrimination
- Date it happened
- 2017-04-01
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