Bill Would Require Government Study of Racial Disparities in Auto Insurance Pricing
Consumer Reports and ProPublica found that some major insurers were charging drivers in minority neighborhoods rates as much as 30 percent more than drivers in other areas with similar accident costs. Even in California’s highly regulated insurance market, units of Nationwide, USAA and Liberty Mutual were charging prices in risky minority neighborhoods that were more than 10 percent above similarly risky zip codes where more residents were white.
Our analysis was limited to the four states – California, Illinois, Texas and Missouri – that collect the information necessary to do such comparisons. The other states said they didn’t have the necessary data. If it is enacted, Takano’s bill would require a report on racial disparities in auto insurance pricing in all states to be completed within two years.
As a result of our report, California regulators required Nationwide and USAA to adjust their auto insurance rates. They said their review confirmed our finding that linked the pricing disparities to incorrect applications of a California law allowing insurers to cluster neighboring zip codes into a single rating territory.
The Federal Insurance Office was created in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In the final days of the Obama Administration, the office published a preliminary report on affordability in the auto insurance market. It pledged to conduct a more comprehensive study and to ask large insurers to contribute the necessary zip-code level data.
However, the insurance office, which has been operating without a permanent director since the beginning of the Trump Administration, has not completed such a study. (The office’s longtime deputy director, Steven Seitz, serves as the acting director.) And in an October 2017 report to the White House, the Treasury Department suggested a revised role for the insurance office, focusing on promoting the industry. Its recommendations omitted the office’s original mandate, which required it to protect traditionally underserved communities and consumers.
“The inactivity of the Federal Insurance Office and the Trump Administration’s consumer protection office has been extremely frustrating to the Congressman and many Democrats,” said Josh Weisz, spokesman for Takano. “Seeking to fulfill the basic commitment to collect data seems like the first right step.”
Civil rights groups praised the proposal.
“We see time and again people, especially in communities of color, have trouble finding and keeping mandatory insurance because it is so expensive,” said Sam Brooke, deputy legal director of the Southern Poverty Law Center. “This creates a vicious cycle where, because they cannot afford it, they get additional tickets with mounting fees.”