The Consumer Federation of America (CFA) released research findings on July 27, which concluded that the major auto insurance companies, with the exception of State Farm, are almost always charging single, divorced, and widowed women more than married women. GEICO, Farmers, Progressive, and to a lesser extent, Nationwide and Liberty, are using marital status as a factor in the determination of their premium rates.
It’s not illegal but Stephen Brobeck, CFA’s executive director, questions the fairness of it, particularly for widows, who were charged more than married women in the 10 cities studied. The average difference of 14 percent between married and widowed ranged from 29 percent in the case of GEICO, to 3 percent for Nationwide.
“Hiking rates on women whose husbands die seems both unfair and inhumane,” said Stephen Brobeck at a teleconference.
Instead, CFA urges that auto insurance pricing be determined by driving-related factors, such as accidents, moving violations, and miles driven.
State Farm was a major exception. State Farm did not use marital status in its pricing. Price quotes for single, separated, divorced, widowed, living with domestic partner, and married were the same in the 10 cities CFA studied.
The analysis collected the insurance premiums for the following profile of a driver seeking insurance: female, 30 years old, no accidents or moving violations, high school degree, and drives a 2005 Honda Civic.
Rates were collected for these 10 cities: Baltimore; Tampa, Fla.; Louisville, La.; Chicago; Minneapolis; Houston; Denver; Phoenix; Oakland, Calif.; and Portland, Ore. The CFA found quotes from websites of the auto insurers for the minimum liability insurance required by states. (All states require drivers to have liability insurance except New Hampshire.)
For instance, in Baltimore, the CFA found GEICO charges $1,244 annual premium compared to $1,292 for the single woman, and $1,408 for the widow. Farmers charges $2,676, while singles and widowed are charged $3,010. Liberty’s cost was $2,604; singles and widowed, $2,868. Nationwide charged more for singles, $1,372, but married and widowed paid the same, $1,294.
It is irrelevant to this study, but the variation between insurers is astounding.
Nationwide sometimes charged widows more than married women, but at other times, in Portland, Oakland, Houston, and, as we saw, in Baltimore, the same rate prevailed.
Older Female Drivers
The single, separated, and divorced female drivers consistently pay higher premiums than married female drivers. Farmers, Progressive, Nationwide, and Liberty charged exactly the same for these drivers; GEICO premiums vary considerably.
The price differential persists as the 30-year-old woman in the profile ages, but the data collected for 50-year-olds was sparse and so only suggestive.
The CFA looked at pricing of auto insurers GEICO, Farmers, and Progressive in three cities—Louisville, Chicago, and Houston—for a 50-year-old, who otherwise had the same profile. Findings targeted the annual premium of the single woman compared to the married woman. Progressive charged singles 6 percent more in Houston. GEICO charged singles 134 percent more in Louisville. Farmers charged singles 20 percent more in Chicago.
Insurance Industry Defends Rates
James Lynch, chief actuary of the Insurance Information Institute, said that discounts, as he preferred to call differential rates, or “penalties” that CFA implies, are nothing new, and go back to the 1920s. Pricing using marital status has been around at least 40 years, he said.
“What the insurance companies are doing is charging a premium according to the customer’s propensity to have a loss; the more likely the insurance company is going to incur a loss, the more the insurance company is going to charge you, and, unfortunately … single people are more likely to have losses; married people are less likely to have losses.”
The same is true for women who have unfortunately become widows, he said. “I can’t explain to you precisely why that is the case, but I can tell you that the data is this way,” Lynch said, who is a fellow of the Casualty Actuarial Society.
The insurance companies have to file their rates with each state’s insurance department, and have to have the data to support differential rates, Lynch said. “Anytime an insurance company is charging more, they have to justify to state regulators,” he said.
