New York City drivers living in predominantly Black and low-income communities pay hundreds and thousands of dollars more for auto insurance than drivers living in predominantly white and wealthy neighborhoods, according to a new report from the Consumer Federation of America released on Wednesday.
The nonprofit advocacy group's analysis found that drivers with perfect driving records and excellent credit scores living in the largely Black neighborhood of Brownsville pay an average of $2,500 a year more for auto insurance than drivers with identical profiles living on the Upper East Side, an affluent and predominantly white area.
Consumer advocates and some New York state lawmakers are trying to stop auto insurance companies from using credit scores to set rates, saying the practice is unfair and discriminatory. They argue that allowing insurance companies to use non-driving factors, like credit scores, results in low-income drivers and people of color paying higher premiums even when their driving records are flawless.
“So here we are in a country that's supposed to be the greatest in the world, yet we allow businesses to keep people poor and to punish people because of their decisions about where they would like to live,” said Assemblymember Crystal Peoples-Stokes, the Assembly’s Democratic majority leader, in a virtual news conference.
Peoples-Stokes and state Sen. Kevin Parker (D-Brooklyn) introduced bills that would prohibit insurers from using a driver’s credit history to determine how much they pay for auto coverage.
About 95% of auto insurers in New York use credit scores to set prices, according to the Consumer Federation of America. The group says drivers with low credit scores may have experienced a job loss or an unexpected medical bill.
The group says California, Hawaii and Massachusetts have barred auto insurance companies from using credit scores to set rates. The organization says insurance companies have not demonstrated how non-driving factors are connected to driving risks.
Kristina Baldwin, vice president of the American Property Casualty Insurance Association — the primary national trade group for home, auto and business insurance — said most states allow the use of credit history to set auto insurance rates because there is a “high correlation” between insurance scores and the likelihood of filing insurance claims.
“Over the years studies have demonstrated that drivers with lower credit-based insurance scores have higher losses and those with higher credit-based insurance scores have lower losses,” Baldwin said.
The Consumer Federation of America used auto insurance premium data from August 2020 for every ZIP code from 10 auto insurers, representing about 80% of the state insurance market.
It found that insurance companies offer the lowest prices to drivers living in five Manhattan ZIP codes along the Upper East Side, Upper West Side and Midtown East, which are majority white areas that are home to residents who are high-income earners.
Meanwhile, drivers living in Brownsville, Canarsie, East Flatbush and Crown Heights, which are predominantly Black neighborhoods with low median incomes, paid the highest auto insurance premiums, according to the ZIP code analysis done by the Consumer Federation of America.
“We've got a systemic bias in so many aspects of our financial and socioeconomic life,” said Douglas Heller, a co-author of the analysis. "When we require people to buy a product like auto insurance, we need to do better.”
This story was updated to include a comment from a spokesperson for the American Property Casualty Insurance Association.
