Car insurance rates vary greatly among providers with some charging high rates for standard minimum liability coverage, according to research by the Consumer Federation of America.
The CFA reports that most good drivers, those with no accidents or moving violations, who live in moderate-income areas in 15 cities are being quoted high auto insurance rates by major insurers for the minimum liability coverage required by those states. More than half (56 percent) of the rate quotes to two typical moderate-income drivers were more than $1,000 and nearly one-third of the quotes (32 percent) exceeded $1,500.
The research, which uses the websites of the four largest auto insurers nationwide — State Farm, Allstate, Progressive and GEICO — also revealed that rate quotes are often highly variable. In one city price quotes from these companies to the same woman ranged from $762 to $3,390.
“It is difficult to understand how insurers can justify charging more than $1,000 a year for minimum insurance coverage to drivers who have perfect driving records for many years,” CFA Executive Director Stephen Brobeck said in a statement. “It is also difficult to understand why the same driver is being quoted rates from different insurers that vary so considerably. Insurers say rates reflect risk and cost but if this in fact is the case, why do their assessments of these factors differ so radically?”
J. Robert Hunter, CFA’s director of insurance and former Texas insurance commissioner, called on state insurance commissioners to thoroughly investigate these issues.
“Given the fact that all states except New Hampshire require drivers to carry auto insurance, insurance commissioners have the responsibility to ensure that these drivers are charged fair, affordable rates. Our research suggests that most rates charged moderate-income drivers are neither fair nor affordable,” Hunter said in a statement.
CFA’s research on rates sought quotes for minimum liability coverage from the websites of the four largest auto insurers. State Farm, Allstate, Progressive, and GEICO have 48 percent of the auto insurance market nationwide and more than 60 percent of the market in a number of states, including three that we surveyed — Florida, Maryland, and the District of Columbia.
For the study, CFA created two hypothetical consumers—a man and a woman. Both had good driving records, with no accidents or moving violations in the seven years (man) and 12 years (woman) they had driven. They also had good credit ratings, were single with one dependent, rented in moderate-income areas, had a high school degree and drove a paid-for 2002 Honda Civic 10,000 miles a year. Rates were checked in 15 cities across the country.
More than half (56 percent) of the dollar quotes were at least $1,000, while nearly one-third (32 percent) were at least $1,500. There were more rate quotes at $3,000 and over (4) than under $500 (3).
The man was quoted somewhat higher rates overall than the older woman but the difference was not very large — 57 percent of the man’s quotes and 53 percent of the woman’s quotes were at least $1,000. All quoted rates $3,000 and more were for the woman.
