Wednesday, April 12, 2017

Study shows minorities pay higher insurance premiums

Lloyd's of London - Photo by Charis Tsevis
A recent study has shown that consumers in predominantly minority neighborhoods pay as much as 30% more for auto insurance as do others in similar accident costs. This study was published by ProPublica, an independent, investigative journalism outlet that has won multiple Pulitzer Prizes.

In conducting their research, ProPublcia looked at premium and claim payouts in California, Illinois, Texas, and Missouri. They identified insurance claims in different areas.

Once they identified predominately white neighborhoods that had ones that had the same level of insurance claims as predominately black or Latino neighborhoods, they compared the premiums that consumers in those neighborhoods were charged. In each instance, the predominately white neighborhoods paid less for auto insurance than their minority counterparts with the same claims history.

The full text of this report on the auto insurance industry is available here. The methodology and source of information behind this study are explained in more detail here.

The Insurance Information Institue, a trade group for the insurance industry, disputes the findings from ProPublica in an op-ed available here. The insurance industry argues that ProPublica did not use the correct information in their analysis. This is true.

Of course, it's also true that the data that the insurance industry says that should be used for an analysis like this is not publicly available. ProPublica used the closest proximity to the ideal information from that data is available.

This brings me to two important conclusions.

  1. More information ought to be available publicly. It's impossible for any discussion or debate to happen when only one party in the conversation has reliable data. As it currently is, with only the insurance industry have detailed data, it creates an environment that is ripe for abuse.
  2. There needs to be more review done on an independent basis. The fact that a difference in prices paid among predominately white and predominately minority neighborhoods is this consistent across states and insurance carriers clearly demonstrates in my mind that something is amiss and someone needs to look into independently.

People have argued that auto insurance premiums had a racial component to them for years. This adds at least a little bit of additional credibility to those arguments.

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