Car insurance prices vary greatly by person and area. We know that how we drive and where we drive affect our insurance rates. But what we do with our lives can be another reason some of us pay more for car insurance. And if you don’t have the right education or job, your insurance company could be charging you more.
Education: Just one more thing car insurance companies can use to hike prices
Auto insurance companies use various data to create a personalized rate. Most people may have a good understanding of the better-known factors. But a recent investigation found there could be two other things companies consider: your level of education and career path.
A recent Consumer Reports study shows some car insurance companies “ask prospective customers about their education level or job title — and quote some drivers different premiums based on the results.” These findings didn’t come from only a few small insurance companies either. CR lists Liberty Mutual, Geico, and Progressive among “several large auto insurers” that take education and job title into consideration.
In fact, in a small study across 21 zip codes, Consumer Reports found a strong discrepancy between insurance premiums for drivers with no high school degree and those with advanced degrees. Under this study group, Liberty Mutual drivers without a high school degree were quoted more than 6 percent higher than those with advanced degrees. These percentages increase with Progressive and Geico. Progressive quoted drivers with less education a yearly premium of 12.9 percent higher than those with more education. And Geico charged 16.4 percent more.
The New York Public Interest Research Group (NYPIRG) conducted a study that shows “three of the top five auto insurers considered education when setting premiums, and two considered occupation.” The NYPIRG’s research found that insurance companies charged an average of 19 to 41 percent more to those with less education and “blue-collar” jobs.
How auto insurance companies use your career and education to set rates
These same findings have shown up in studies across various years and continue to stir controversy. Like any other institution, car insurance companies are not allowed to judge a prospective client based on race, religion, etc. But these companies can use biographical information. That means “socioeconomic factors sometimes outweigh driving records and habits in the premiums that insurers set.”
Many argue that the use of education and career is prejudiced and disproportionately affects certain groups of people. But car insurance companies say there’s a correlation between a person’s education/job “and the financial risk of insuring a customer.”
Some insurance companies claim drivers with higher education and “white-collar” jobs are “less risky” to insure and less likely to file claims. But many experts believe placing people into blue-collar/white-collar categories is the same as assessing people based on their race or religion — “disproportionately hurting non-white customers and anyone with a low income.”
Other factors that could influence your rates (and you can’t do anything about some of them)
Because insurance companies must assess risk, rates can vary based on driver behavior (like past accidents or violations). Driving distance and your car’s make and model also matter. According to NerdWallet, your address, marital status, and even homeownership can affect your car insurance rate. Insurers can also use your credit score, car’s safety features, owning/ leasing status, and “odds” of your car being stolen to determine prices.
However, as Consumer Reports points out, “insurers can also lean on biographical details that you can’t control, such as your age or gender.” In fact, only a few states don’t allow companies to use gender as a determining factor. In most cases, car insurance companies charge different rates for women and men, with higher rates for younger men and higher rates for older women.