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Your work and education may determine your car insurance premiums

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Last week I went online to get a car insurance quote from Mercury Insurance. I went through this process twice, once listing my profession as an engineer.

The rest of the information was the same, including age, address, driving records, car manufacturer, etc., but as an engineer, the monthly fee was $ 247.88 instead of $ 262.88, which could save $ 179.89 a year.

My price comparison experiment was inspired by a petition filed on July 18 by taxpayer and consumer advocacy group Consumer Watchdog, protesting Mercury Insurance Company’s request to the California Insurance Department to raise car rates. Did.

Mercury Insurance, California’s leading car insurance provider, wants to raise customer rates by 6.9%, or $ 131 million.

However, the main factor underlying Consumer Watchdog’s demand for hearings on proposals is the claim that Mercury’s fees are not only “excessive” but also “unjustly discriminatory.”

“It’s a problem we’ve been fighting for years to fix in California, where insurance companies illegally charge people based on arbitrary occupations,” said Consumer Watchdog Executive Director. Carmen Consumer told me.

In 1988, Californians passed Proposal 103. In this proposal, premiums had to be based primarily on criteria such as driver safety and experience, rather than arbitrary discriminatory features such as employment status, credit score, place of residence, or gender. Rate increases and other rate-setting factors now require insurance approval.

The use of gender in pricing was officially banned in January 2019.

The department has never approved the use of education or the profession itself as a deciding criterion, but insurers have found a loophole by offering discounts to what is called an “affinity group.”

For some companies, these discount categories include insurance company employees, graduates or members of certain professional associations, but for Mercury, civil servants (for managers or technicians), scientists (for managers or technicians). Have a bachelor’s degree in at least a particular field) or an engineer.

“Companies are carefully selected customers and are causing discrimination in the car insurance market,” Barber said.

Educators and military members are also eligible for discounts, but the group is biased towards more educated and high-income earners.

Various effects regardless of driver safety

The data confirms the results.

According to a 2019 analysis of insurance companies with an “affinity group” by the California Department of Insurance, three-quarters of people in the underserved community do not belong to any of these special discount categories.

The report also found that outside of such groups, about 60% of customers pay 1.5% to 25.9% more on car insurance premiums. They also tend to be low-income, low-educated, and high-colored zip codes.

Other studies and reports have revealed similar disparities between California and across the country.

Importantly, it’s not easy to understand that low-income, predominantly black and brown communities can be disadvantaged if discounts are in favor of people with advanced degrees and high-paying professions.

Overall, blacks and Latin Californians are less likely to earn a bachelor’s degree or higher and earn less than whites.

Undocumented residents most likely to work in low-paying jobs are generally specifically excluded from these benefits.

“California insurance companies are improperly using people’s professions and education to set car insurance premiums,” said nearly 12 civil rights and communities a few months before the state’s investigation. A group of base organizations wrote to insurance commissioner Ricardola.

“Most obvious, working people doing regular work pay higher car insurance premiums so that doctors, engineers, and other high-income wage earners can pay less. . “

In the letter, the Union said, “Farmers insurance charges factory workers 14.5% higher annual premiums than accountants and doctors.” “Progressive car insurance charges office managers with high school diplomas annually. It’s a premium than the same driver in the same profession who has an undergraduate degree that charges 6.3% higher premiums. “

Unlike pricing indicators based on factors such as safety, occupation and education do not necessarily correlate with driving risk due to the low number of serious accidents and complaints.

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