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Renters Pay More for Car Insurance, Study Finds

Whether your monthly housing check goes to a bank or a landlord shouldn’t affect your auto insurance. But a new study by the Consumer Federation of America shows renters pay more than homeowners for the same car insurance . This makes it harder for poor auto owners to get the car insurance they need.

Advocates for auto accident victims have known for a while that auto insurance companies intentionally raise insurance rates on poor and minority drivers. But these redlining practices can be difficult to prove.

The Consumer Federation of America (CFA) is a non-profit consumer protection organization. It seeks to advance consumer interests through research, advocacy, and education. It recently published a new study showing that, almost across the board, auto insurance companies improperly charge consumers more if they rent their home than if they are homeowners.

CFA polled 7 of the largest auto insurance providers – State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual, and Nationwide – testing rates across 10 cities. The organization tested the rates for a 30-year old female motorist who has a 2005 Honda Civic and a perfect driving record. The only thing they changed was whether this woman rented or owned her home.

The car insurance quote went up an average of 6% for rental version, but the difference could be as drastic as 47% (from Farmers Insurance in Louisville). Many places across the country saw differences in the double digits.

Geico was the only company that didn’t consider home ownership in setting its rates. Chicago stood out as the only place where renters catch a break, but only with one insurance company. Allstate charged $134 less for Chicago renters than homeowners there.

The exception was in Oakland, California. Consumer protection laws in California prohibit insurance companies from considering home ownership or socioeconomic status factors in determining premiums. Instead, they are limited to prioritizing driving safety record, annual mileage, and years driving experience when setting customers’ premiums.

CFA has tested several other socioeconomic factors before. Over the past 3 years, it has shown auto insurance companies will charge higher premiums for:

  • Lower credit scores,
  • Blue collar jobs,
  • Lower education
  • Unmarried drivers; and
  • Living in predominantly African American communities.

In response to these results, CFA is calling on insurance commissioners across the country to prohibit the use of home ownership in setting premiums. Doing so allows them to place additional burdens on lower-income drivers and make it harder for them to comply with state mandatory insurance laws.

Here in Michigan, redlining contributes to the high cost of auto insurance in Detroit, where over half of drivers don’t have insurance. As the legislature begins to consider 2016’s version of no-fault reform bills, they should include strong consumer protection laws to prevent insurance companies from charging more for renters’ policies.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. He represents the victims of car crashes against the insurance companies. If you have been in a serious auto accident, contact Christensen Law for a free consultation.