The California Department of Insurance has released data showing wide socioeconomic disparities in auto insurance group discounts offered to millions of state drivers. The investigation illustrates that many affinity groups disproportionately and adversely affect drivers residing in ZIP codes with lower per capita incomes, lower levels of educational attainment, and larger communities of color.
Some insurers offer lower automobile premium pricing to certain “affinity groups” including white-collar occupations and highly skilled workers. Department data shows that one-quarter of Californians receive an affinity group premium reduction ranging from 1.5% to 25.9% depending on the insurer and group.
Insurance Commissioner Ricardo Lara called the new data “disturbing” after the first affinity group fact-finding hearing in the Department’s history last week in Los Angeles.
“This disturbing data confirms what we have heard for years, that auto group discounts do not apply equally across California,” said Insurance Commissioner Ricardo Lara. “We are evaluating whether insurer affinity group discounts violate state laws, and I am prepared to act to ensure all Californians have access to affordable auto insurance regardless of their income, education, or ethnicity.”
Among the findings released by the Department of Insurance:
Customers in surveyed affinity groups tend to be in higher income ZIP codes. Only 26% of Californians in the lowest-earning areas ($22,516 per capita and below) receive group discounts, compared to 55% in the highest-earning areas ($49,070 per capita and above).
Those in affinity groups that were surveyed are more likely to reside in ZIP codes with a higher average educational attainment. Only 28% of those living in areas with the lowest number of college degrees receive discounts, compared to 56% for those where half or more have college degrees.
Those in affinity groups are more likely to reside in ZIP codes with a predominantly non-Hispanic white population. 47% of persons living in ZIP codes with a large non-Hispanic white population (62% or greater) receive an affinity group discount. Only 29% of those in heavily minority areas (greater than 83%) receive discounts.
Three-quarters of those in underserved communities were not in an affinity group, compared to 57% for the rest of the state.
The Department of Insurance is responsible for the review and approval of automobile insurance premiums in the state to ensure they are fair and based on objective factors. The 1988 voter-enacted Proposition 103 established the mandatory factors to be a driver’s driving safety record, miles driven, and years of driving experience, followed by optional factors that the Commissioner may permit for use in automobile insurance rating.
In January, the Department of Insurance prohibited the use of gender in private passenger automobile rate-setting in order to remove factors that are beyond a driver’s control.