Rating factors that have little to do with an individual'sdriving abilities appear to have considerable bearing on the priceconsumers pay for auto insurance, a report from Consumer Federationof America asserts.

CFA also says the rating factors in question discriminateagainst low- and middle-income drivers.

The CFA released its third report this year examining the affordability of autoinsurance and its impact on moderate income individuals' mobilityand access to better paying jobs.

Inthis latest report, the consumer-advocacy group examined hownon-driving rating factors can affect the cost of auto insurance,increasing the price of coverage by as much as 50 percent or moredepending upon location and insurer.

“The use of these factors clearly discriminates againstlow- and moderate-income drivers, which includes single clericalworkers with less education who rent in moderate income areas, forexample,” said Stephen Brobeck, executive director of CFA, during apress conference.

The report examined the price of minimum-liability insurance fora 30-year old woman working as a bank teller, with a clean drivingrecord, high school education, and insurance coverage that lapsed15 days ago.

Quotes were sought from the websites of the five largestinsurers in the United States in the cities of Baltimore; Miami;Louisville, Ky.; Houston and Los Angeles. A quote was obtained forthe individual under the standard information provided. Then newquotes were obtained adding five different rating factors:

• Married.

• Homeowner.

• Professional.

• No break in coverage.

• Higher-income zip code.

With each factor, the price of insurance declined, and when allfive rating factors were added to the quote, the change in pricewas as high as 73 percent.

That was the case for Progressive, with a quote in Baltimore.The insurance quote for the driver was $2,696 before the ratingfactors were added. With all five rating factors, the price droppedto $718.

Robert Hunter, director of insurance for CFA, points out that,in some cases when a chargeable accident was added to the ratingfactors, insurance was still less than it was for the driver whodid not get a discount for the five rating factors. In the case ofProgressive again, the Baltimore driver, with a chargeable accidentand the five rating discount factors received a quote of $1,022,$1,674 less than the initial quote.

“Charging almost $2,000 more for these factors is patentlyunfair and, as an actuary, actuarially unsound,” says Hunter. “Ican't stress strongly enough how important it is for each state andinsurance commissioner to fully investigate the insurance optionsavailable to low and moderate income families in their states tofully address this critical issue, since only state insurancecommissioners and state legislators can mitigate thisinjustice.”

The report also includes a survey of 1010 adult Americansperformed by CFA and ORC International asking what they thoughtabout the use of specific factors to set auto insurancepremiums.

While the majority says they thought the use of trafficaccidents, moving violations, number of years licensed and age werelegitimate factors for determining the price of insurance coverage,non-driving factors received a resounding thumb down.

Sixty-seven percent or more of the public believe occupation, noprevious insurance because there was no car, level of education,credit score and gender are not fair factors for determining theprice drivers should be paying for their insurance.

Hunter questioned whether states are doing enough to make autoinsurance affordable for lower income drivers, and indicated thatmany should take a look at California's program of auto insurancefor low income families that is lower than $300 a year and does notrequire a subsidiary from other drivers.

NEXT PAGE: INDUSTRY RESPONDS

Responding to the report, Willem Rijksen, a spokesman for theAmerican Insurance Association, says in an e-mail, “Insurers use awide variety of proven factors to assess risk and determinepolicyholder rates which are approved by state insuranceregulators. The use of these factors, such as credit-basedinsurance scoring, location of the vehicle, driver experience, andtraffic citations, helps insurers to more accurately pricerisk. Generally speaking, the more consumers know about thesehelpful tools, the more receptive they are to them given theirbroad overall benefit. As the study's own data points out, autoinsurance remains a very competitive market and consumers arewell-advised to shop around to find the coverage that best meetstheir individual needs.”

Alex Hageli, director of personal lines for the PropertyCasualty Insurers Association of America comments, “The [CFA] hasonce again found an excuse to trot out the same old series ofmostly misguided public policy prescriptions they've been pushingfor years, this time in association with the release of anational survey of consumer attitudes on insurance pricing. Theirapproach would be counterproductive and hurt most motorists,resulting in higher costs and fewer choices for all consumers.”

He argues the survey results are not surprising becauseconsumers and legislators do not understand “why insurers usecertain factors to determine premium.” However, when they do theirattitudes change.

“Creating an environment of robust competition is the best stepthat state insurance commissioners can take to address theavailability and affordability of insurance,” he says.

Neil Aldridge, senior vice president for state and policy affairfor the National Association of Mutual InsuranceCompanies says, pointing to consumer survey portion of the report,says that rating factors should not be “regulated by popularity,”adding, that “is not exactly a precise way to measure risk.”

If consumers understood that the discounts are associated withrisk, their answers would change, he says.

“We've built our entire rating system correlated to risk,” saysAldridge.

Update: This story was updated with comments from theProperty Casualty Insurers Association of America and the NationalAssociation of Mutual Insurance Companies.