Why Black and Latinx drivers pay more for car insurance

TAYLOR JUNG | DECEMBER 16, 2021 

NJ Spotlight News

Black drivers in New Jersey pay much higher insurance premiums than white drivers.

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When Cuqui Rivera searched for a new car insurance policy at the end of 2019, she said she did not expect a new company would offer over $1,800 in savings.

Rivera said she was a loyal customer with a national car insurance company for about 20 years, always paying her premium on time and keeping a good driving record. Her annual rate was $2,997 — which she thought was a deal — and didn’t think a new company’s price would be much different.

“I went to NJ CURE for comparably the same full coverage and the whole year’s cost would have been $1,188. That’s a very big difference,” she said.

Rivera was shocked — and angered — when she saw her rate drop. At the time, she was part of a coalition of organizations that included her employer Latino Action Network, as well as New Jersey Citizen Action, New Jersey Policy Perspective and others. They were looking at findings from a Consumer Federation of America report that showed how the auto insurance industry may take occupation, education, credit score and home ownership into account when setting rates. And that, they say,  disadvantages Black and brown communities who do not have the same access to economic and educational opportunities. And now that coalition is pressuring lawmakers to approve a bill now stalled in the Assembly that would ban this practice.

Rivera didn’t know the exact problem they were fighting against was also happening to her.

The coalition looked into Rivera’s situation to determine why her old rate was so high compared with the quote from the new company, which takes only driving records into account when setting rates.

“I had a perfect driving record; no points at all. I have 35 years as an advocate; my credit score was in the 800s,” Rivera explained in an interview with NJ Spotlight News. “The only thing that jacked up that score like that was my education. Which has nothing to do with my driving record.”

Rivera, who only has a high school diploma, joked, “A doctor obviously drives better than me.”

Between six children and 27 grandchildren, she said that she didn’t have “much money to burn.” But she was still able to pay nearly $3,000 annually for car insurance. For many other low-income and/or Black and brown families in New Jersey, that might not be the case, she said. A new Consumer Federation of America report from November 2021found that New Jerseyans in ZIP codes with a majority Black population pay 49.5% higher premiums than those in majority white ZIP codes. The same was true for those who live in majority Latinx ZIP codes: They pay a 49.9% higher rate. People who live in majority white ZIP codes pay an average of $1,355, which is under the state average of $1,460.

“It’s not that auto insurers are saying, ‘Oh you’re Black or brown, so I am going to charge more.’ They’re saying, ‘I’m going to charge poor people more. I am going to use these factors that let me know that they are poor. I’m not really allowed to charge poor people more, but I can charge poor people more if they have a job title, for example, that usually has a low salary,’” said Dena Mottola Jaborska, associate director of New Jersey Citizen Action.

 Credit scores as a determining factor for car insurance rates, for example, can be a barrier for Black and brown drivers because they tend to have lower credit scores. While the 1974 Equal Credit Opportunity Act outlawed the use of race, gender, sex, marital status and other factors in determining a person’s score, people in nonwhite communities are more likely to live paycheck to paycheck, or be burdened by student loan debt or be shut of owning a home due to the legacy of redlining.

“That creates a pattern of racial discrimination because, as we all know, systemic racism” is rife in our state and nation, said Mottola Jaborska. “It’s Black and brown people who are predominantly the people who have the low credit scores,” she added, “the low educational levels and the job titles that are paying less. And so it’s a proxy for race even though it’s meant to be a proxy for income.”

A former actuary and currently CEO of Root Insurance, Alex Timm said using occupation, education, credit scores and home ownership to determine customers’ rates is a known practice in the industry. He explained that companies use the data as a way to determine who is a “good customer” so they can attract their business.

“Which is somebody who is going to stay with them a long time, pay their bills on time, not drive through certain neighborhoods,” Timm added.

Timm said he was disillusioned when he found this out as an actuary and eventually started his own car insurance company to mitigate the situation — a company that primarily uses driving records to determine rates. Root is in the process of offering its insurance in New Jersey, but said it would try to expedite the process if the state passes legislation to ban other companies from using potentially discriminatory factors when setting their premiums.

A bill in the Legislature championed by Black and brown legislators to outlaw this practice (S-111/A-1657) was passed in the Senate in Jan. 2021 with 22 voting yes, nine voting no and nine abstaining. Its Assembly companion has yet to get a committee hearing.

Advocates like Rivera and Mottola Jaborska, who work with the coalition focusing on this issue, say time is running out as the lame-duck session draws to a close on Jan. 11. The coalition has generated 10,000 signatures and emails to legislators to help push the bill through the Assembly. The group called it a “failure” of the Assembly and Assembly Speaker Craig Coughlin for not advancing the bill. NJ Spotlight News reached out to Coughlin for comment.

“We can’t be talking about wanting to deal with the racial wealth gap without dealing with these issues, because this is a major issue when you think about what could you do to help Black and brown people build economic security, wealth in their families, ascend to the middle class,” Mottola Jaborska said.

That’s because transportation can impact the kind of job you have, where your kids go to school and more, she added.

And while there is no legislation at the moment, she recommends that car insurance buyers shop around,  as Rivera did, if they’re paying more than $1,000 to $1,200 a year.

Rivera ended up switching her insurance. And while she feels the same issue her coalition is fighting for also happened to her, she says the problem is greater than just her.

 “The real statement here is not about (me). The real statement here is about how many poor people — that are barely making it from check to check, feeding kids, working three jobs — have no clue,” she said. “It’s hurting you right now.”

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published this page in News and Politics 2021-12-16 03:29:59 -0800