Report Accuses Auto Insurers Of Racial Discrimination

CHICAGO (CBS) — Accusations of discrimination have been leveled at car insurance companies after a recent report shows drivers in minority neighborhoods pay more than those in white communities.

Ed Stephens, who lives in a predominately black community, said he’s not surprised to hear he probably pays higher premiums than drivers in predominately white communities.

“It’s unfair, because you got people out here making an honest living and trying to do the right thing for the right reason even when there’s no one’s looking. I think everybody should have the same fair shot,” Stephens said.

According to a joint report by ProPublica and Consumer Reports, Illinois drivers living in minority zip codes can pay at least 10 percent more in rates than their counterparts in white zip codes and, in some cases, as much as 50 percent more.

The report looked at two men, both of which are employed with similar driving records:

  • The minority man lives in East Garfield, drives a 2012 Honda Civic and pays $190 a month.
  • The non-minority man lives in Wrigleyville, drives a 2015 Audi Sports Utility and pays $54 a month.

“You don’t need to be nuanced or careful to understand that this is racist,” said Sen. Daniel Biss.

In Chicago — which contains one-third of the state’s minority neighborhoods — the law has not prohibited users from differentiating prices by neighborhood, the report states.

Biss, along with State Sen. Jacqueline Collins, are introducing legislation that would address the inequities, but insurance companies maintain that race is not a factor.

“The way that we measure risk has nothing to do with race,” said David Snyder, Property Casualty Insurers Association of America. “We don’t collect racial information. What we do is we collect date that is likely to predict the risk of loss.”

Snyder said zip codes and a person’s credit history are two predictors.

“We know that zip codes and credit scores are a proxy for race,” Collins said.

According to the report, auto insurers have been observed to charge higher average premiums to drivers living in predominately minatory urban neighborhoods than to drivers with similar safety records living in majority white neighborhoods for decades. Insurers have long defended their pricing by saying that the risk of accidents is greater in those neighborhoods, even for motorists who have never had one, the reports says.

But the report, which examined auto insurance premiums in Illinois, California, Texas and Missouri, found that many of the disparities in auto insurance prices between minority and white neighborhoods are wider than differences in risk can explain.

A representative from the Insurance Information Institute called the report flawed. The spokesman said it sensationalizes an issue that should be taken seriously. All the industry experts recommend drivers shop around if they feel they’re paying more money than they should.

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