Summary of Previous Research on Auto Insurance Affordability and Accessibility

Since 2012, Consumer Federation of America (CFA) has undertaken an effort to research the 

state of the auto insurance market in America with a particular focus on issues of access and 

affordability for lower- and middle-income Americans. This research project has included 

studies using a variety of data sources, including NAIC and ISO reports, company-specific rates 

by ZIP code from a third party vendor, and systematic rate testing of individual insurance 

company websites. 

As discussed below, the research addresses several different aspects of auto insurance rates, 

premiums and the market, but all point to a few key findings:

 The cost of state-mandated basic liability insurance is higher than many lower-income 

Americans can afford and the number of uninsured citizens in this category is higher than the 

national average as a result;

 Insurers use a variety of socio-economic rating factors that push premiums up for lowerincome Americans despite good driving records; and

 Stronger state consumer protections related to auto insurance rate setting leads to greater 

access to and more stability in auto insurance markets.

Below is a short description of each of the reports that CFA has issued since 2012. This is 

followed by a summary of the key recommendations from the reports.

High Price of Mandatory Auto Insurance for Lower Income Households

Consumer Federation of America (2014)

The country’s five largest auto insurance companies do not make a basic auto insurance policy 

available to typical safe drivers for less than $500 per year in over 2,300 urban and suburban ZIP 

codes including 484, or more than a third, of the nation’s lowest-income ZIP codes. In the 

report, CFA analyzed 81,000 premium quotes for State Farm, Allstate, Farmers, Progressive, 

Geico and each of their affiliates in all ZIP codes in 50 large urban regions, which include urban, 

suburban and adjacent rural communities. CFA also reviewed the premium quotes from an 

additional 58 insurance companies – comprising a total of 207 insurance affiliates including 

those of the five largest insurers - which produced similar results.

In 24 of the 50 urban regions, there was at least one lower-income ZIP code where annual 

premiums for a minimum limits policy exceeded $500 from every major insurer. In nine of these 

50 areas – Miami/Ft. Lauderdale, Detroit, Minneapolis/St. Paul, Tampa/St. Petersburg, 

Baltimore, Orlando, Jacksonville, Hartford, and New Orleans – prices exceeded $500 in all

lower-income ZIP codes.
Consumer Federation of America | Page 2

This report included the finding from a recent national survey that more than three-quarters of 

Americans (76 percent) believe that a “fair annual cost” for state-mandated insurance for a 

typical good driver with no accidents and no tickets should be less than $500. 

Uninsured Drivers: A Societal Dilemma in Need of a Solution. 

Consumer Federation of America (2014)

This report found that most uninsured drivers in America have low incomes and cannot afford to 

purchase the mandatory minimum liability coverage required by their state. The report also 

revealed that these low-income drivers are increasingly adversely impacted by state and local 

government actions, including raising liability requirements (driving up premiums), more 

rigorous enforcement, and stiffer penalties. However, there is little difference in uninsured rates 

between those states that penalize uninsured drivers harshly and those that do not. The report 

reviewed financial responsibility laws in every state and found:

 Fourteen states allow jail sentences for a first offense, and an additional six states allow 

sentences for a second offense.

 Thirty-two states allow for the possibility of license suspension for a first offense.

 Thirty-three states have possible fines of $500 or more for a first offense, with West 

Virginia’s possible maximum fine at $5,000.

 Seven states – Georgia, Kansas, Massachusetts, Michigan, Minnesota, South Dakota, and 

West Virginia – allow for first-time offenders to be jailed, have their license suspended, and

be fined $500 or more.

CFA Analysis Shows Auto Insurers Charge Higher Rates to Drivers with Less Education and 

Lower-Status Jobs

Consumer Federation of America (2013)

Several major auto insurers place a heavy emphasis on their customers’ occupation and 

education when setting prices, forcing lesser educated, blue collar workers with good driving 

records to pay substantially higher premiums than drivers with more education and higher paying 

jobs. For example:

 GEICO charges a good driver in Seattle 45% more if she is a factory worker with a high 

school degree than if she is a plant superintendent with a bachelor degree;

 Progressive charges the factory worker 33% more in Baltimore; and 

 Liberty Mutual charges the worker 13% more in Houston.

The reported also highlighted a national survey that found that about two-thirds of Americans 

believe that it is unfair to use education and occupation when pricing insurance policies.
Consumer Federation of America | Page 3

What Works: A Review of Auto Insurance Rate Regulation in America and How Best Practices 

Save Billions of Dollars

Consumer Federation of America (2013)

Over the past quarter century, auto insurance expenditures in America have increased by 43 

percent on average and by as much as 108 percent. These increases occurred despite substantial 

gains in automobile safety and the arrival of several new players in the insurance markets. Only 

in California, where a 1988 ballot initiative transformed oversight of the industry and curtailed 

some of its most anti-consumer practices, did insurance prices fall during the period, resulting in 

more than $4 billion in annual savings for California drivers.

This report used NAIC data to assess the impact of different types of insurance market oversight 

(prior approval, file and use, use and file, flex rating, and deregulation) on rates, industry 

profitability, and competition. It also provided a detailed analysis of California’s experience with 

the nation’s most consumer protective rules governing the auto insurance market.

Largest Auto Insurers Frequently Charge Higher Premiums To Safe Drivers Than To Those 

Responsible For Accidents

Consumer Federation of America (2013)

CFA analyzed premium quotes from the five largest auto insurers in twelve major cities and 

found that two-thirds of the time, insurers would charge a working class driver with a 45 day 

lapse in coverage and a perfect driving record more than companies charged an executive with 

no lapse in coverage but a recent at-fault accident on their record. In 60% of the tests, the lowerincome good driver was charged at least 25% more than the higher-income driver who had 

caused an accident.

Use of Credit Scores by Auto Insurers Adversely Impacts Low- and Moderate-Income Drivers

Consumer Federation of America (2013)

Holding all other factors constant, the two largest auto insurers, State Farm and Allstate, charge 

moderate-income drivers with poor credit scores much higher prices than drivers with excellent 

scores. Using data purchased from a third party vendor of insurance rate information, this report 

showed that State Farm increased rates for the low credit score driver an average of 127 percent 

over the high credit score customers and Allstate raised rates by 39 percent, costing State Farm 

and Allstate customers an average of more than $700 and $350, respectively, based solely on 

credit scores.

The report also pointed to a recent national survey conducted for CFA that found that, by a 

greater than two to one ratio, Americans reject insurer use of credit scores in their pricing of auto 

insurance policies.
Consumer Federation of America | Page 4

Auto Insurers Charge High and Variable Rate for Minimum Coverage to Good Drivers from 

Moderate-Income Areas

Consumer Federation of America (2012)

This report used extensive website testing to show that good drivers -- those with no accidents or 

moving violations -- who live in moderate-income areas in 15 cities were being quoted high auto 

insurance rates by major insurers for the minimum liability coverage required by those 

states. Over half (56%) of the rate quotes to two typical moderate-income drivers were over 

$1000, and nearly one-third of the quotes (32%) exceeded $1500. 

The report also presents findings from a national survey that shows that lower-income families 

report knowing people who drive without insurance at a much higher rate than higher-income 

drivers. Further, nearly 80 percent of drivers agreed that "they [the uninsured drivers] do so 

because they need a car but can't afford the insurance."

Lower-income Households and the Auto Insurance Marketplace: Challenges and Opportunities

Consumer Federation of America (2012)

Access to an automobile plays a critical role in creating economic opportunities for lowerincome Americans and the affordability of auto insurance plays a key role in this access. This 

report provides an overview of the auto insurance market with a detailed discussion of low- and 

moderate-income (LMI) households’ participation in the auto insurance market. The report 

summarizes pricing information collected by CFA as well as data related to availability, residual 

markets and uninsured motorists. 

At the heart of this report, which was the first in the series of reports outlined above, is the 

finding that for millions of lower-income Americans auto insurance is unaffordable and 

inaccessible despite their unblemished driving records. High priced auto insurance, which often 

leads LMI drivers to choose between giving up their cars or driving uninsured, creates serious 

economic hardships, and the issue must be addressed by policymakers and regulators. The report

concludes with a summary of the issues, obstacles and needs facing LMI customers and policy 

suggestions for addressing them. 

Summary of Recommendations 

In conjunction with this research, CFA has developed a series of recommendations for 

policymakers and regulators to address the issue of access and affordability for LMI drivers. The 

various recommendations can be grouped into three main categories: data collection, reforms to 

end discrimination, efforts to increase access.
Consumer Federation of America | Page 5

Data Collection

 The National Association of Insurance Commissioners should develop a model data call that 

will assist state regulators in tracking insurance costs of LMI drivers. 

 The Federal Insurance Office should collect data sufficient to conduct a comprehensive review

of auto insurance access and affordability of auto insurance.

Reforms to End Discrimination

 Prohibit the use of rating factors – such as occupation, education, and credit score – that are 

surrogates for income and do not have a causal relationship to insurance risk.

Efforts to Increase Access

 States should create programs in which good low- and moderate-income drivers can purchase 

basic liability coverage for affordable rates. California has such a program with rates that are 

lower than $350 a year and that covers the program's costs with no subsidy from other drivers

or taxpayers.

 States should lower required minimum liability coverage in order to bring down the costs of 

mandatory auto insurance for LMI drivers.

 States should require insurers to offer drivers with clean driving records the lowest premium 

for which they qualify from among the company’s affiliates doing business in the state.