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Car Insurance Costs More for Blue-Collar Drivers, New Survey Shows

Blue-collar drivers pay higher premiums for car insurance than white-collar drivers, according to a study by the Consumer Federation of America. The penalty is considerable: Blue-collar drivers pay an average of $681 more per year than white-collar drivers.

"We believe the insurance companies are making lower-income drivers subsidize higher-income drivers," says Doug Heller, a consumer advocate and co-author of the study.

Dave Snyder, vice president of policy for the Property Casualty Insurers Association of America, says there is good reason for the the higher premiums. "We’re not pricing on the basis of socioeconomics," says Snyder. "We’re pricing on the best information we can put together on the risk of loss." The member companies of the PCIAA underwrite 42 percent of the car insurance sold in the U.S.

Christine Tasher, a Geico spokeswoman, agrees. "Geico bases its prices on actuarially justified costs. We work hard to provide low rates and savings to all consumers," she says.

To conduct the study, CFA visited the websites of the five biggest car insurers to obtain quotes for four hypothetical drivers in 15 U.S. cities coast-to-coast. The premiums included only liability insurance at each state's minimum limits; collision insurance was not included. The study compared car insurance premium quotes for one male and one female driver by plugging in criteria—such as education, occupation, and whether the driver was a homeowner or renter—so that the insurer would consider these drivers to be of low economic status.

It then did the same thing again, but plugged in criteria that would allow the drivers to be considered of high economic status (see table below). In both cases, the drivers were considered to have "good" driving records.

The study did not consider credit scores. Our special report, "The Truth About Car Insurance," explains that credit scores can have a big impact on premiums. 

The CFA found that car insurers charged the blue-collar drivers 59 percent more per year for coverage than their white-collar counterparts. 

The blue-collar penalty varied by city. On average, it was highest in Queens, N.Y. where the premium for blue-collar drivers was 97 percent higher than for white-collar workers. Atlanta came next, with a premium that was 92 percent higher. It was lowest in Los Angeles (9 percent) where California's Proposition 103 requires that insurers prioritize driving record, miles driven per year, and driving experience over non-driving factors such as occupation. 

Characteristic

Higher Economic Status, Good Driver, Male and Female

Lower Economic Status, Good Driver, Male and Female

Occupation

Executive

Blue-collar worker

Educational attainment

Master's degree

High school graduate

Marital status

Married

Single

Residence

Homeowner

Renter

Car insurance

With same insurer continuously for past three years

No car and no insurance for previous six months

Average Annual Premium

$1,144

$1,825

"No car insurance policy should be priced based upon a driver's economic status," says Norma Garcia, manager of the financial services program at Consumers Union, the policy and advocacy arm of Consumer Reports. "How one drives is more important than who one is," she says.

But Snyder of the PCIAA says there's a problem with that. "A major reason why a lot of the other factors are used is because state motor vehicle records are notoriously inaccurate," he says. Part of the reason is that many violations are legally dismissed and kept out of motor vehicle records when offenders agree to attend traffic school, according to the Insurance Research Council, an industry research group. 

How to Lower Your Car Insurance Costs

  • Regardless of your economic status, shop for car insurance first at the companies we found to have the lowest prices: Amica, USAA, and State Farm. If you think you might be considered "low economic status" consider State Farm first. The CFA study found that State Farm penalizes drivers with that status the least—$217 compared to $614 to $915 for the four other insurers. 
  • Look for car insurance plans at TheZebra.com, a website that provides customized premium quotes from 18 to 35 insurers per state.
  • If you receive an "adverse action" notice because your credit score led to a higher premium, you might be able to request an “extraordinary life circumstances exception,” which can waive use of your score if it was hurt by circumstances beyond your control, such as unemployment, divorce, or a serious illness.



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