Systemic racism can be covert. Here’s one way Pennsylvania and the nation can reduce it.

Systemic racism isn’t always easy to spot. It may be in the last place you’d consider looking -- such as your car insurance premium.

When they set your rate, most insurers consider information other than your driving record. Do you own your home, or do you rent? Did you graduate from high school, or college? Are you married, or single? What type of work do you do? What’s your credit score?

A white driver and an African American driver may have the same driving record, but too often, African Americans pay more for insurance because of other factors, according to the Consumer Federation of America, which has been lobbying for years to outlaw the use of nondriving criteria.

“When insurers base premiums on drivers’ socioeconomic status, they are invariably doing so in a manner that disproportionately targets African Americans with higher prices,” Doug Heller, the federation’s insurance expert, said in the federation’s latest report on the issue in June. “The companies will insist that they never ask for a customer’s race, but if they are serious about confronting systemic racism, it is time they recognize that their pricing tools use proxies for race that make government-required auto insurance more expensive for Black Americans.”

With nearly every state requiring drivers to be insured, motorists can’t avoid these discriminatory practices. The best they can do is shop around for a better rate.

Legislation is pending in Congress to ban the use of nondriving data. Heller was among those who testified at a House committee hearing about the problem in March.

He said the Consumer Federation’s review of more than 200,000 insurance quotes covering nearly every ZIP code in the country in 2015 found “systematic pricing disparities for drivers in predominantly African American communities.”

In communities where more than three-quarters of residents were African American, premiums averaged 70% more than premiums in communities that were less than one-quarter African American, Heller told the committee.

A representative of the insurance industry countered that all factors used are “actuarially sound,” and to restrict their use would undermine the competitive marketplace and raise rates.

“Today insurers use many different rating factors and they weigh these factors differently. With a variety of factors in use, consumers can shop; they have more choice. With fewer factors, there are fewer options, more guesswork and higher prices for consumers borne out of necessity,” testified Erin Collins, a vice president at the National Association of Mutual Insurance Companies.

Heller told me some insurers rely on some factors and some rely on others. There are only a few states that prohibit the use of certain nondriving data for setting premiums. In Pennsylvania, only the use of gender is prohibited.

He said Pennsylvania did take a step in the right direction amid the coronavirus pandemic.

As the economy ground to a halt and it became clear that many people would have trouble paying their bills, the Pennsylvania Department of Insurance told insurers in late March it could not use declining credit scores to raise rates when renewing policies. It also asked insurers to review their use of credit scores when setting rates.

The department, and state lawmakers, should revisit their rate-setting regulations. The state has an opportunity to become a leader in this area.

The Insurance Department has shown a willingness to review whether rates are set fairly based on the use of socioeconomic data. In 2015, it started requiring insurers to statistically document why recent widows -- and widowers -- should pay more to insure their vehicles.

It said their suddenly single status couldn’t be the only reason. That change came based on research by the Consumer Federation of America that pointed out how single women were being charged more than those who were married.

It’s time for state officials to embrace the other research done by the federation on how the use of socioeconomic data hurts people of color, too.

Few states have been willing to do much, though.

Credit scores can’t be considered in California, Massachusetts and Hawaii. Education and occupation can’t be considered in Michigan, New York, California and Massachusetts. Montana bans use of marital status. California, Massachusetts and Minnesota prohibit use of home ownership status. Seven states, including Pennsylvania, don’t allow gender to be considered.

The easiest way to address the problem would be to set national standards.

The federal legislation that’s pending on this issue, HR 3693, the Prohibit Auto Insurance Discrimination Act, would block vehicle insurance companies from considering education; occupation; employment status; home ownership status; credit scores and consumer reports; gender; ZIP code or adjacent ZIP codes; census tract; marital status; previous insurer; and prior insurance coverage.

Congress has shown little interest in passing the legislation, though. It’s been pending in committee for more than a year. It’s a golden opportunity for lawmakers who amid the recent protests have talked about the need to undo long-standing policies that hurt African Americans to actually do it.

Morning Call columnist Paul Muschick can be reached at 610-820-6582 or [email protected].

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