Baltimore residents with only a high school diploma and a blue-collar job often pay more for auto insurance than white-collar professionals with a college degree, according to a survey released Monday by the Consumer Federation of America.
The survey of the top 10 insurers in Baltimore and nine other markets across the country found that some companies set rates based in part on a driver's education and occupation. The lower the level of job and education, the higher the premiums, the CFA said.
"What do you think they are really measuring? What is the risk of not going to the next level of your degree? How does that increase our risk [when] driving?" asked J. Robert Hunter, the CFA's director of insurance and former Texas insurance commissioner. "They are using their marketing desires rather than risk factors to set the prices."
Hunter maintains that insurers' questions about education and occupation are aimed at identifying higher-income households that could afford to buy other lines of insurance. But as a result of this practice, he said, low-income and minority consumers are being priced out of insurance. The CFA estimates that one-quarter to one-third of motorists drive without coverage, even though all states but one, New Hampshire, require insurance.
The consumer group's study is based on quotes from insurers' websites. The CFA looked at the cost of a minimum liability policy for a 30-year-old woman who drives a 10-year-old Honda and hasn't had an accident or moving violation in the past decade. However, she has been without coverage for 15 days — a factor that can bump up a premium.
In Maryland, the minimum liability coverage is $30,000 for bodily injury per person — a maximum of $60,000 per accident— plus $15,000 per accident in property damage.
The difference in premiums is significant.
For example, the annual premium with Geico was $1,971 for a Baltimore factory worker with a high school diploma, compared with $1,647 for a plant supervisor with a college degree, the CFA found. And if the factory worker didn't finish high school, her annual Geico premium would be $2,061.
With Progressive, the factory worker would pay $1,818 annually, or 33 percent more than her supervisor, according to the survey. And the annual premium with Liberty Mutual Insurance would be $2,116 for a factory worker, or 13 percent higher than the supervisor's rate.
Progressive spokesman Jeff Sibel wrote in an email, "We work to price each driver's policy as accurately as possible using multiple rating factors, which sometimes include nondriving factors that have been proven to be predictive of a person's likelihood of being involved in a crash."
Glenn Greenberg, a spokesman for Liberty Mutual, said in an email that the company looks at a wide range of criteria, "each of which is statistically supported and permitted by state regulations."
A 2006 Maryland Insurance Administration report concluded that Geico's use of education and occupation as underwriting factors was "reasonable." Geico said it was letting the Insurance Information Institute, a trade group for property and casualty insurers, respond on its behalf.
Robert Hartwig, an economist and president of the institute, said there is only one reason some insurers collect that information: "They have found it accurately predictive of loss. It has a bearing on the likelihood of a claim being filed and the cost of that claim once it's been filed."
Education and occupation are among two dozen factors insurers weigh, including gender, Hartwig said. For example, male drivers can end up paying higher rates because they tend to be in a greater number of accidents and more expensive ones than female motorists, he said.
Other major insurers — State Farm, Allstate, Nationwide, Travelers and USAA — do not set premiums based on education and job in the 10 states surveyed, the CFA said.
American Family Insurance said it does not use education and occupation to set rates but asks about employment to make sure the policy is for personal and not commercial purposes.
But policies from insurance companies that don't consider education and occupation aren't necessarily cheaper.
The CFA found that Travelers' annual premium for the Baltimore factory worker would be $4,182 for a minimum liability policy, while Allstate charged $3,008. The companies didn't return calls for comment by Monday's deadline.
"The rates tend to be relatively very high in Baltimore, compared to most other cities," said Stephen Brobeck, the CFA's executive director.
"Comparison shopping is essential," he added. Consumers should go on insurance companies' websites to get quotes, then call an agent to see if they can figure out how to lower premiums, Brobeck said.