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Commissioner Lara Sees “Disturbing” Disparities in Auto Insurance Discounts for Millions of Drivers

News: 2019 Press Release

For Release: September 24, 2019
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Commissioner Lara Sees “Disturbing” Disparities in Auto Insurance Discounts for Millions of Drivers

LOS ANGELES, Calif. — The Department of Insurance has released data showing wide socioeconomic disparities in auto insurance group discounts offered to millions of California drivers. The investigation illustrates that many affinity groups disproportionately and adversely affect drivers residing in ZIP codes with lower per capita incomes, lower levels of educational attainment, and larger communities of color.

Some insurers offer lower automobile premium pricing to certain “affinity groups” including white-collar occupations and highly skilled workers. Department data shows that one-quarter of Californians receive an affinity group premium reduction ranging from 1.5% to 25.9% depending on the insurer and group.

Insurance Commissioner Ricardo Lara called the new data “disturbing” after the first affinity group fact-finding hearing in the Department’s history last week in Los Angeles.

“This disturbing data confirms what we have heard for years, that auto group discounts do not apply equally across California,” said Insurance Commissioner Ricardo Lara. “We are evaluating whether insurer affinity group discounts violate state laws, and I am prepared to act to ensure all Californians have access to affordable auto insurance regardless of their income, education, or ethnicity.”

Among the findings released by the Department of Insurance:

  • Customers in surveyed affinity groups tend to be in higher income ZIP codes. Only 26% of Californians in the lowest-earning areas ($22,516 per capita and below) receive group discounts, compared to 55% in the highest-earning areas ($49,070 per capita and above).
  • Those in affinity groups that were surveyed are more likely to reside in ZIP codes with a higher average educational attainment. Only 28% of those living in areas with the lowest number of college degrees receive discounts, compared to 56% for those where half or more have college degrees.
  • Those in affinity groups are more likely to reside in ZIP codes with a predominantly non-Hispanic white population. 47% of persons living in ZIP codes with a large non-Hispanic white population (62% or greater) receive an affinity group discount. Only 29% of those in heavily minority areas (greater than 83%) receive discounts.
  • Three-quarters of those in underserved communities were not in an affinity group, compared to 57% for the rest of the state.

The Department of Insurance is responsible for the review and approval of automobile insurance premiums in the state to ensure they are fair and based on objective factors. The 1988 voter-enacted Proposition 103 established the mandatory factors to be a driver’s driving safety record, miles driven, and years of driving experience, followed by optional factors that the Commissioner may permit for use in automobile insurance rating.

In January, the Department of Insurance prohibited the use of gender in private passenger automobile rate-setting in order to remove factors that are beyond a driver’s control. 

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Media Notes:

  • The Department of Insurance requested voluntary information from 95 of the 168 companies writing automobile insurance in California, and 33 responded, representing more than 16 million insured vehicles (approximately 62% of the total personal automobile market).
  • The data reflects the U.S. Census Bureau definition for “Non-Hispanic White,” i.e. – white without indicating a Hispanic or Latino origin. According to the U.S. Census Bureau, “Hispanic” refers to people who self-identify as Cuban, Mexican, Puerto Rican, South or Central American, or another Spanish culture or origin, regardless of race. People who identify as Hispanic or Latino may be of any race.
  • The Department of Insurance defines an underserved community as one with a percentage of uninsured motorists 10% above the state average, per capita income below the 50th percentile, and that has a two-thirds or greater minority population. 

Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

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