OAI: Consumer Research Highlights Income's Impact on Auto Insurance
Calif. low-cost program lauded amidst findings of rates that are scarcely affordable nationwide.
RANCHO CUCAMONGA, CA, June 20, 2012 /24-7PressRelease/ -- Research released by the Consumer Federation of America (CFA) this week focuses on what the group says are high and unpredictable rates even for moderate-income motorists, highlighting affordability issues in the industry and how income plays into the availability of coverage, according to Online Auto Insurance.
Researchers calculated how much car insurance would cost for two made-up motorists with similar backgrounds by compiling quotes from four major insurers in 15 different cities. The findings showed that 56 percent of the quotes returned rates that were more than $1,000 annually and 32 percent were more than $1,500.
The motorists used in the quotes had spotless records and high school diplomas and were seeking minimum coverage in a moderate-income area (where median income was around $30,000). In a statement released with the findings, J. Robert Hunter, a CFA director, said that the group's research revealed that such moderate-income motorists are charged rates that "are neither fair nor affordable."
A January report from the CFA claimed that insurers, which are forbidden by law to use income as a factor in determining rates, use other factors such as education, coverage continuity and ZIP code to effectively link income to rates.
That report contained recommendations that the CFA echoed in its latest research. CFA officials again urged state regulators to further narrow rating factors by barring insurers from considering attributes like occupation and education to set prices.
The CFA also repeated recommendations to state regulators that it said would serve motorists in lower-income brackets by offering low-cost, bare-bones policies that would allow them to at least legally drive. However, the only such state program is California's Low-Cost Automobile Insurance Program, which offers annual premiums that can be as low as $231 to eligible drivers.
Program officials tout its effect on the number of uninsured drivers in the state, as 59 percent of drivers in the program previously lacked coverage.
The unavailability of such programs isn't helping the rate of uninsured drivers elsewhere, and the lack of attention on affordability compounds the problem, according to the CFA, which added that many states are focusing on stiffening penalties for driving without coverage in lieu of increasing affordability.
"Fourteen states now even have jail penalties," Hunter said about punishments for driving without coverage. "For a start, they should lower the required minimum coverage and take action to ensure that this coverage is being fairly priced. Our earlier research suggests that it often is not."
Recent research from other entities suggests that coverage costs have been largely static over the past few years.
Data from the National Association of Insurance Commissioners showed that the average expenditure nationwide for auto coverage fell $4 from 2008-09. Average coverage costs for a sedan rose 3.4 percent in the past year, according to an American Automobile Association (AAA) study.
For more on this and related issues, head to http://www.onlineautoinsurance.com/quotes/how-much-car-insurance-costs.htm for access to an easy-to-use quote-comparison generator and informative resource pages.
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