Study: Education levels can increase auto insurance rates

Some major auto insurers routinely charge customers with only high school diplomas more for coverage than customers who have college degrees, despite good driving records, according to a new study by the Consumer Federation of America.

The consumer advocacy group said GEICO, for example, charges a high school graduate obtaining minimum liability coverage, which almost all state governments require, 45 percent more than college grad customers in Seattle, 21 percent more in Chicago and 20 percent more in Baltimore.

The Georgia insurance commissioner’s office said the state prohibits insurers from basing rates on education level or employment.

Michael Barry, a spokesman for the Insurance Information Institute, said only a limited number of insurers use a prospective policyholder’s formal education and occupation as rating and underwriting factors.

CFA, however, said five of the 10 largest auto insurers — GEICO, Progressive, Liberty Mutual, Farmers and American Family — apparently use education and occupation in their rate-making in most states. Progressive charged high school grads 33 percent more in Baltimore, for example, and 9 percent more in Denver, CFA said. Liberty’s website didn’t even include quoted rates for high school graduates.

A Progressive spokesman told the Insurance Journal the insurer “uses multiple rating factors, which sometimes include non-driving factors that have been proven to be predictive of a person’s likelihood of being involved in a crash.” A spokesman for GEICO could not be immediately reached.

To conduct its study of online insurance rates, CFA sought quotes for a hypothetical factory worker with a high school diploma and a plant supervisor with a college degree.

“Since most Americans need a car and almost all states require the purchase of auto insurance, many lower-income workers are faced with the choice of paying these high, and often unaffordable prices, or breaking the law by driving without insurance,” CFA Executive Director Stephen Brobeck said.

The association said many drivers in low-income urban areas often go without insurance because of the high cost. The group also said that while many states prohibit the use of education and occupation to deny coverage, they permit the use of these factors in setting rate levels. The high rates deny low- and moderate-income consumers coverage, the group said. The group urged state insurance commissioners to curb the practice of using education level to determine rates.