Illinois car owners who live in minority areas pay more for auto insurance, report says

April 05--Chicago millennials Otis Nash and Ryan Hedges have the same auto insurance company and both get discounts for being good drivers.

But the similarities end there. Nash, a 26-year-old living in East Garfield Park, struggles to make the $190.69 monthly car insurance payment for his 2012 Honda Civic LX. Meanwhile, Hedges, of Lakeview, pays only $54.67 a month to insure his 2015 Audi Q5 Quattro.

The two men are cited as examples in a new report suggesting that people who live in urban minority neighborhoods could be paying as much as 30 percent more for car insurance. An industry group says the report's findings are flawed.

The analysis, published Wednesday by nonprofit investigative news organization ProPublica and Consumer Reports, was based on insurance data in California, Illinois, Missouri and Texas. The data included premiums charged for liability insurance and the average amounts paid by insurers for liability claims in each ZIP code examined.

In Illinois, 33 of the 34 insurance companies analyzed charged rates that were at least 10 percent higher in ZIP codes where a majority of the residents were minorities. Six Illinois insurers charged rates 30 percent higher in minority ZIP codes.

The report's authors focused on bodily injury and property damage insurance premiums, also known as liability insurance, because most states require that coverage.

They also compared the premiums charged by each insurer in each ZIP code with the average risk of liability payouts by all insurers in that ZIP code.

From 2012 through 2014, Illinois insurers have paid out about $172 per car each year in bodily injury and property damage claims in Nash's ZIP code, 60612, according to data collected by the Illinois Department of Insurance. That's 20 percent less than the $216 per car that insurers paid out for similar claims in Hedges' ZIP code, 60657.

"Why would you go to the most poor communities and charge more?" said Nash in the report. "It's an unfortunate reflection of where we are in the corporate world and how we treat each other," Hedges added.

In Missouri and Texas, more than half of the insurers charged rates that were at least 10 percent higher in minority areas. In California, where insurers are regulated more tightly, eight companies were charging significantly higher rates in minority ZIP codes, according to the report.

Marta Tellado, president and CEO of Consumer Reports, noted in the report that discriminatory insurance pricing can be a drain on household budgets, limit employment opportunities and limit growth in communities.

The Insurance Information Institute, a trade group, disputed the report's findings after hiring an independent expert to review the underlying data. The group's chief actuary, James Lynch, said the analysis in the report doesn't account for other factors that can affect insurance rates.

On a Wednesday media call, Lynch said, "These are serious accusations. ... The flawed way they looked at it, and to come to this conclusion is completely unjustified."

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