Low-income or black? You may be paying more for auto insurance in the Bay Area

March 08--When it comes to paying for auto insurance, where you live matters. But, it may also matter who lives around you.

New data from the auto insurance comparison company, Gabi, shows higher prices for auto insurance in areas where there is a larger proportion of poor or black residents.

In the East Bay, for example, residents in the 94621 zip code, which covers East Oakland from roughly 55th Avenue to the San Leandro border, pay, on average, $1,000 more per year than residents in the 94550 zip code of Livermore. In that area of Oakland, more than 45 percent of the residents are black and the median household income hovers just above $31,000, compared to Livermore, where fewer than 1 percent of the residents are black and the median income is more than $109,000.

Researchers controlled for crime rates and household income and used the same "dummy driver" to compare quotes across 14 of the largest insurance companies, keeping the type of car, age of the driver, driving history and other factors constant, said Hanno Fichtner, Gabi's CEO and the lead researcher in the study. But, that still didn't explain the differences in prices, he said.

"What was surprising for us was that we saw the percentage of African American people in a zip code had the highest impact (on prices), which means people of color pay the most for insurance policies," Fichtner said. "It's also concerning that the people who make the least pay the most for auto insurance."

It's true that, holding all other factors equal, drivers in different locations may end up paying different prices for the same coverage, he said. But, those differences can be explained by the frequency and severity of past claims in the area that insurance companies have had to cover, he said.

"Different rates reflect the difference in exposure to loss and have nothing to do with race," Snyder said. "Insurance companies don't collect information on race, it would violate the law if we did, and we don't want it."

But, Pro Publica's investigation did try to measure past losses, said Robert Hunter, the director of insurance for the Consumer Federation of America. The investigation looked at four states where the state insurance commission collects data on risk and found that in California, some companies were charging 10 percent, and as much as 32 percent, more on average for drivers in minority zip codes than similarly risky non-minority zip codes.

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The Consumer Federation of America's 2015 report examined the densest urban communities and found drivers in zip codes with predominantly black residents paid 60 percent more, or almost $700 annually, than drivers hailing from predominantly white urban zip codes.

Auto insurance is mandatory in nearly every state and that puts the poor and people living in minority communities at a disadvantage, said Congressman Mark Takano (D-Riverside). California's landmark insurance reform act of 1988, Prop 103, set the strictest regulations in the country when it comes to what factors insurance companies can consider when setting rates.

That's been a boon to Golden State motorists, who actually saw a decrease in auto insurance premiums in the first 25 years after the law went into effect, compared to an average 40 percent increase across the country, according to a 2013 Consumer Federation of America report.

But, more data is needed to fully understand where systemic biases are unfairly targeting some residents over others, Takano said. He introduced a bill earlier this year that would require insurance companies to report loss data by zip code in all 50 states. It also directs the Federal Insurance Office to analyze the loss data and submit a report to Congress on the impact of race on insurance prices.

"We aren't rushing to any conclusions, but I think we need to understand this better. We need to understand why this variation is happening," Takano said. "And what it will take to understand this is data."

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