Study: Renters Pay Higher Auto Insurance Premiums Than Homeowners

February 9th, 2016 by Simply Justice

A recent study found that renters often pay higher auto insurance premiums than homeowners with similar driving records. The study, authored by the Consumer Federation of America, found that the average auto insurance premiums for renters were 7 percent higher than those for homeowners. The study also showed that some companies charge renters as much as 20 percent more for auto insurance than homeowners. Consumer advocates claim that the price differences act as discrimination against lower-income drivers, while insurance industry group cite discounts for combined home and auto coverage as the cause of the differences.

Details of the Auto Insurance Premiums Study

The study examined the auto insurance premiums for minimum liability coverage offered to a prospective customer. The study used the example of a 30-year-old female owner of a ten-year-old Honda Civic and a perfect driving record. The only factors the study changed were the sample driver’s home city and their status as either a renter or owner. The study calculated the auto insurance premiums offered in ten cities, including Phoenix, Chicago, Tampa, and Louisville. Researchers used premium quotes available from Allstate, Farmers, Geico, Liberty Mutual, and other major insurers.

Study Finds Big Differences In Auto Insurance Premiums

The study revealed some remarkable differences in auto insurance premiums between renters and homeowners. Renters with policies from Liberty Mutual were found to pay an average of 19 percent higher rates than homeowners. In Phoenix, the difference was 20 percent. The auto insurance premiums quote from Farmers Insurance for a renter in Louisville was 47 percent higher than the same coverage for a homeowner, the highest difference in the entire study. The study did not examine premiums for California cities, as state law prohibits insurers from using homeowner status to determine prices.

CFA Exec: Auto Insurance Premiums “Target” Low-Income Drivers

J. Robert Hunter, insurance director at the CFA, told reporters that the study shows that insurers use home ownership status to discriminate against lower-income drivers when pricing their auto insurance premiums. According to a report from the U.S. Federal Reserve, the median income for renters was less than half of that for homeowners. Mr. Hunter, who also once held the post as the state insurance commissioner in Texas, also said, “Insurance companies should not be allowed to target people based on home ownership status.”

Industry Defends Auto Insurance Premiums Differences

An insurance industry spokesperson defended the use of homeowners’ status in determining auto insurance premiums. David Synder, a vice president at the Property Casualty Insurers Association of America, released a statement in response to the auto insurance premiums study. The statement said that the industry’s pricing methods are “subject to rigorous actuarial standards and state regulation,” including the application of homeowners’ discount on auto insurance coverage.

Source: Arizona Republic

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NOTE: This blog post is a news story and is not an endorsement of Arguello, Hope and Associates by any party mentioned herein.

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