CFA Finds Auto Insurance Companies Discriminate Based on Home Ownership

There are plenty of benefits to home ownership, but paying less on your car insurance shouldn't be one of them. A recent study by the Consumer Federation of America shows that renters can pay up to 47% more than renters for the same car insurance. The organization is calling for stronger consumer protection laws to combat the practice.

There are a lot of factors that can affect your auto insurance premium. Age, gender, and driving history are all appropriate considerations in determining how high the risk is you will be in an accident. But home ownership has nothing to do with the likelihood of a car accident. But a new study by a private non-profit organization, Consumer Federation of America (CFA) shows that auto insurance companies are using it to set higher premiums for poor and minority drivers.

The organization polled 7 different auto insurance companies in 10 cities across the country. They requested a quote for insurance for a 30 year old woman with a perfect driving record who drives a 2005 Honda Civic. The only thing they changed was whether the driver owned her home, or rented it.

On average, they found that renters pay 6% more for their car insurance than home owners. In many places across the country, the difference was in the double-digits. Differences between Liberty Mutual policies were 23% in Baltimore and 26% in Newark. In Louisville, renters pay as much as 47% more ($768) than home owners through Farmers Insurance.

Considering home ownership in setting car insurance premiums is one of many ways auto insurance companies try to improperly set premiums based on consumers' income or socioeconomic status. Previous surveys by CFA have shown similar pricing differences based on credit scores, blue-collar employment, education level, marital status, and racial demographics of consumers' communities.

Douglas Heller, a consumer advocate with CFA said:

“With all these different rating factors that have nothing to do with driving, auto insurers are charging good drivers hundreds and sometimes even thousands of dollars extra just for being poor.”

To fight against this trend, CFA is calling for regulators and policymakers to pass laws prohibiting auto insurance companies from using non-driving factors to set their premiums. California has already passed such a law, but much of the rest of the country lags behind. J. Robert Hunter, CFA’s Insurance Director, said:

“Virtually every state requires drivers to buy insurance, but we shouldn’t force them to buy a home in order to get the best price.  State Insurance Commissioners and elected representatives should step in and stop this practice.”

Dani K. Liblang is a consumer protection attorney at The Liblang Law Firm, P.C., in Birmingham, Michigan. She represents consumers, acting as a shield against big businesses that illegally take advantage of them. If you believe you have been the victim of consumer protection violations, contact the Liblang Law Firm today for a free consultation.