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Auto Insurance Companies Do Not Play Fair

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Posted On 10.22.14 by in Blog

A recent national consumer survey found that a majority of the driving American public rejects the use of educational and occupational background as a basis for Auto Insurance Rates.  The Consumer Federation of America (CFA) made their findings public recently and it showed that some of the major auto insurers in the country are using algorithms which include education levels and occupations as a basis for setting their premiums.

Auto insurers charge high premiums for minimal coverage to most working people, even those with perfect driving records, who live in urban areas,”.  Stephen Brobeck, CFA’s Executive Director.

These finding are disturbing to most Americans who feel that these practices of auto insurers are discriminatory, just as setting insurance rates based on race would be discriminatory.  In light of the fact that every state requires auto insurance coverage, those with lower incomes and higher rates have a difficult choice to make; drive without coverage or leave the keys to the car at home.

 RATES SHOULD BE BASED ON RISK

When calculating rates, the auto insurance industry should take into account many factors that do correlate to the risk they take in offering to insure individual drivers.  Driving experience and driving history such as tickets and accidents, these are the relevant factors in determining the business of insurance rates for drivers.  Many states allow for credit and legal history as a factor as well, although there are some studies which dispute the relationship to claims risk and credit history and some which fail to show how the consumer is benefited by such practices. http://www.naic.org/topics/topic_credit_scoring.htm        Therefore, it stands to reason that educational levels and occupation do not directly reflect this risk that insurance companies tout.    Many consumer advocates are berating insurance carriers for this practice as it unfairly places a financial hardship on those who need the insurance coverage the most.  When enough of the governmental regulatory agencies investigate these further there will surely be adjustments to this practice that is tantamount to discrimination.

 HOW TO GET BETTER AUTO INSURANCE RATES AND COVERAGE

As a consumer, you are in a position to shop for better rates for this mandatory coverage.  Here are a few things that you can do to possibly get better rates from some of the best carriers.

 

  •  Shop Around-  When your insurance coverage is close to expiring, check online or with your personal insurance agent.  There are discounts available for many classifications and special offers may be available, especially if your agent senses that you are ready to change insurance carriers.  J. Robert Hunter, director of insurance for the Consumer Federation of America said, “If you shop for insurance, it is quite easy for one insurer to be half the price of another, even in the same group of insurer.”  Since your agent is working on commission, they are not motivated to inform you of these discounts unless you ‘encourage’ them to by shopping around.

 

  • Document Your Driving Habits- Insurance companies may base rates on how far you live from work, how many miles you drive each month.  Rates also vary depending on where you park your car and what parts of town you frequent.

 

  •  Drive with Care-  A lapse in attention could mean an accident or a traffic ticket, both of which weigh heavily on your insurance ratesInsurance carriers vary from one to another on how much your driving history factors into their rating equations, however, it is considered a severe risk factor should your history take a black mark with an accident or moving violation.

 

  • Review your Coverage-  There are basically two levels of insurance coverage that you may purchase;  1. Mandatory liability coverage is required in 49 states and these coverages have statutory minimums. 2. Optional/Increased coverages for things such as comprehensive, uninsured/underinsured, medical expenses, rental car, loss of income, loss of essential services, and each of these are varying levels of coverage.  Simple rule when buying insurance is that you pay for what you get.  You should evaluate your personal needs with what risk you are able to accept should you be involved in an accident.  Your home and other assets may be at risk if you do not have the proper underlying coverage.  Consult your insurance professional and seek advice from more than one to insure you are getting the best deal possible for the coverage you need.

 

Remember that most insurance companies do not notify you when you are entitled to a discount or better coverage than you currently have.  It is your responsibility to seek out the best insurer and the best coverage for your particular situation.

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