Poor Michigan Residents Pay More for Auto Insurance

It’s no secret that Michigan has some of the highest rates in the country for auto insurance. But how much a particular person pays has to do with far more than his or her driving record. Now advocates are calling for reforms to keep poor Michigan residents from paying more for their auto insurance than their wealthy counterparts.


How is your auto insurance rate calculated? If you ask your insurance company, they will almost always tell you it is based on the likelihood you will get into an accident. Things like past accidents and tickets can certainly spike your rates, but what about the baseline? How do fares line up when two people’s driving histories are equal?

Redlining – the refusal to write policies in risky (predominantly minority) zip codes is illegal. Auto insurance companies are not allowed to consider race or ethnicity when they set prices on their policies. While most companies don’t refuse policies any more, many still appear to be assigning risk to areas based on income or race.

Bob Hunter with the Consumer Federation of America says that major insurance companies use a lot of your personal information to infer how much money you make. In deciding how much they are going to charge you, they may consider:

• Marital status
  
• Education
  
• Occupation; or
  
• Home ownership.
  

None of those things are directly connected with your driving ability or the likelihood that you’ll get into a crash. Instead, they are proxies for income.

Earlier this year, the CFA released a study in which it surveyed insurance costs in cities across the country. Bob Hunter told Michigan Public Radio:

"The people with the poorer economic categories were paying 59% more than people with the richer looking categories."

On average, poor people paid $681 more per year for their car insurance. He says:

"But we even had one case where the poor person paid $5,000 more!"

The industry’s explanation – that it is based on the likelihood of a crash – doesn’t seem to hold up to national scrutiny. In California, using factors like education or marital status is illegal. When CFA looked at their policies, better drivers in California were less likely to pay more, meaning they weren’t as likely to be paying for the accidents of other, less careful drivers.

Equal access to employment is a consumer protection and racial discrimination problem. When the insurance companies use income-based factors to set their premiums, it is mostly poor, minority residents who suffer. Without stricter regulation of the industry, poor Michigan residents will be forced to make the choice between driving without insurance and paying far more than they should.

Dani K. Liblang is a consumer protection attorney at The Liblang Law Firm, PC., in Birmingham, Michigan. She helps people who are facing creditor harassment because of their debts. If collections companies won’t leave you alone, contact The Liblang Law Firm, PC, today for a free consultation.