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Why Are Safe Drivers Not Always Charged The Lowest Car Insurance Rates

Created: 21 October 2014

This is almost like dispelling an urban myth, only it’s about car insurance. Specifically, it’s the notion that “safe” drivers – those having unblemished driving records – always pay lower premiums than accident-prone motorists.

In fact, just the opposite can be true among poorer and less-educated drivers, according to a recent investigation of car-insurance policy pricing conducted by the Consumer Federation of America in Washington, D.C. After looking at policy quotes extended to hypothetical motorists in 12 cities, the CFA found that out of the 60 cases studied, two-thirds of the quotes were higher for drivers with clean driving records than for better educated and more-affluent motorists who had been responsible for an accident. In three-fifths of the case, the rates given were more than 25 percent higher for the accident-free motorists. So much for those safe driver discounts touted so heavily in car insurance ads, right?

Why the discrepancy? The CFA blames auto insurance companies for basing their rates – at least in part – on factors that have little to do with one’s driving record, including a motorist’s level of education, occupation and lack of continuous insurance coverage.

“State insurance regulators should require auto insurers to explain why they believe factors such as education and income are better predictors of losses than are at-fault accidents,” says CFA’s director of insurance J. Robert Hunter. “Policymakers should ask why auto insurers are permitted to discriminate on the basis of non-driving-related factors such as occupation or education.”

The study was based on quotes issued from the five largest insurers – State Farm, Allstate, GEICO, Farmers, and Progressive – for minimum liability coverage (as determined by state law) to two separate drivers. Both were 30-year-old women with 10 years’ driving experience living on the same street in the same middle-income zip code. The first motorist, who never had an accident, was assumed to be single, have a high-school education, work as a receptionist and rent an apartment. By comparison, the second driver – who was far more likely to be quoted a lower auto insurance rate – had an at-fault accident on her record resulting in $800 of damage on her record, but was a home-owning married executive with a Masters degree and had continuous insurance coverage for the last three years.

For their part, the insurance providers say issues like income and education are used as objective actuarial measurements to help determine premiums and do not imply deliberate demographic discrimination. “We work to price each driver’s policy as accurately as possible so that every driver pays the appropriate amount based on his or her risk of having an accident,” says Progressive Insurance spokesperson Jeff Sibel. ”We use 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.”

Still, the CFA found that the safer – yet poorer and less educated of the two motorists – was charged budget-busting premiums of $1,000 or more in 35 of the 60 cases studied. What’s more. the CFA’s survey found that insurance quotes for the same driver varied wildly, with little to no consistency within cities or among providers. For example, Allstate’s yearly premiums quoted for the “good” driver ranged from $850 in St. Louis to $3,292 for the same person living in a similar area of Baltimore. Progressive’s annual rates for good drivers likewise fluctuated from $864 for a Cleveland resident to $1,928 for her equivalent residing in Baltimore. By comparison, GEICO quoted a rate of only $822 for the same Baltimore-based driver. It should be noted that of the five companies surveyed, State Farm was the only carrier that consistently charged the good driver lower rates in all 12 cities.

“A fairly high percentage of low- and moderate-income drivers cannot afford to purchase auto insurance, which is why so many risks breaking the law and getting stuck with accident bills,” says CFA’s Hunter. The CFA suggests state insurance commissioners help make rates fairer and more affordable for a wider range of consumers by lowering minimum liability coverage, making certain that insurers are charging fair rates for this coverage and prohibiting or restricting providers from using factors unrelated to driving (including education and occupation) to price their policies. What’s more, the Federation urges states to follow California’s lead and create programs in which lower-income drivers with good driving records can purchase required liability coverage for affordable rates.

“State regulators should ask insurers why they cannot offer more safe drivers basic minimum liability coverage for about $300, and never more than $500, annually,” Hunter explains. “In California’s state-run, low-income auto insurance program for good drivers, even most participating drivers from Los Angeles are provided this coverage for under $400 annually.

In the meantime, the CFA’s study only underscores the need for drivers in all demographic groups with both good and bad driving records to shopping around among major insurance carriers to find the most affordable rates.

Handling Uninsured Motorists On and Off the Road in Utah

Created: 21 October 2014

It is impossible for Utah drivers to identify who is an uninsured motorist while on the road, so handling vehicles safely and driving defensively is a must. However, when car accidents involving uninsured drivers do occur, it is difficult to know how to best handle the situation.

While there are penalties for driving without insurance in Utah, insured drivers have little recourse. However, with the help of attorneys experienced in personal injury claims against uninsured motorists, insured auto accident victims in Utah may still receive compensation.

State of the Uninsured

Even though almost every state in the U.S., including Utah, requires that drivers carry automobile insurance, many motorists drive without it. When car accidents involve persons who are uninsured, this puts a financial burden on insured motorists and their carriers, especially when plans do not include uninsured/underinsured motorist coverage. It also creates problems for the uninsured, who may face stiff penalties and legal action for injuries or damages. The reasons vary for why drivers choose not to purchase coverage.

Typically, uninsured motorists exist because they do not want to pay for, or are not able to afford, automobile insurance. According to recent data released by the Insurance Research Council (IRC), the poor U.S. economy is to blame for why one in seven American motorists drive without coverage. This amounts to almost 14 percent of all U.S. motorists and costs insured drivers over $10 billion in claim payouts and legal and other fees each year. The IRC also indicates that 8 percent of drivers in Utah do not carry any automobile insurance.

Utah's Laws

Utah statutes require drivers to purchase and maintain automobile insurance on any vehicles they operate on state highways. Motorists must show evidence of this coverage if stopped by law enforcement. Examples of evidence are items like the insurance policy or card, a notice of renewal or a self-funded coverage certificate. Verification that a vehicle is insured from the Uninsured Motorist Identification Database is also acceptable evidence. If Utah drivers cannot provide any proof of insurance, they may face various legal penalties.

How Should You Handle It?

Failing to purchase automobile insurance, or choosing not to carry it, is not good for anyone, especially insured car accident victim in Utah. In some cases, injured victims may carry uninsured/underinsured motorist coverage, so it may be possible to recover from their own insurance companies.

How To Cover Auto Theft Through Car Insurance

In order to be compensated for car theft, you must carry comprehensive coverage. Comprehensive insurance covers vehicle theft and property damage due to vandalism and natural disasters. The first step to protecting yourself against auto theft, therefore, is to obtain a comprehensive auto insurance policy.

Obtaining Comprehensive Coverage

Comprehensive insurance offers further protection than a standard insurance policy, but your annual auto insurance premium is likely to rise when you add this type of coverage.

Ways to Lower Your Auto Insurance Premium

Fortunately, you can lower your auto insurance premium in a number of ways, to include the following:

  • Consistently practice safe driving habits. This can also cut down on the number of auto claims you have to file.
  • Avoid traffic citations and auto accidents.
  • Drive a vehicle your car insurance company considers safe.
  • Drive a vehicle not likely to attract potential thieves and vandals.

This last point will not only help lower your annual premium; it will also protect you from vehicle theft in the first place.

Gap Insurance

In addition to comprehensive insurance, consider purchasing gap insurance. The purpose of gap insurance is to cover the gap between what your car is worth and what you still owe on the vehicle loan, in the even of auto theft or a total loss accident.

For example, if you still owe $12,500 on your vehicle loan, but your vehicle has significantly depreciated in worth―say, to the point that it is only worth $9,500―your gap insurance policy will cover the remaining $3,000.

Gap insurance is the only type of insurance that will cover this gap. All other insurance types―including liability, collision, and comprehensive insurance―will only cover what the vehicle is worth. While your vehicle might still have been in good shape when it was stolen, many vehicles―particularly expensive vehicles―depreciate in value by as much as 30% within three months of purchase.