The Consumer Federation of America is alleging that GEICO uses occupation and income in setting rates. This, according to CFA, results in low income or blue collar workers paying more for insurance than people with education or graduate students. (This does not affect my California readers since rates in our state are strictly regulated and cannot include those factors.)
According to the Washington Post, GEICO has a guide and “the guide, in addition to listing factors such as driving history, age, mileage and vehicle type, includes a section dividing drivers into eight groups based on their education and occupation. Considered ‘more favorable’ are professionals with college degrees and graduate students. ‘Least favorable’ are ‘minimally skilled clerks, assistants, stock clerks and postal clerks,’ as well as long-haul drivers and ‘unskilled and semiskilled blue and gray collar workers.'” GEICO denies the allegations.
The insurance industry seems to defend the practice. Again, the Post reports: “Industry officials said that auto insurance is both tightly regulated and highly competitive, so that practices that have a pernicious impact are likely to be stopped, and in any case, with hundreds of carriers in the market, motorists have plenty of places to shop.”
Allstate offers discounts to certain professionals, and apparently is now offering a discount to judges in Texas. Other companies offer discounts to certain groups and some companies, such as California Casualty or USAA offer insurance only to certain groups.
All I can say is WOW! If the insurance industry is using occupation and income to set rates, this is a serious problem. I have yet to see any study that says income affects how someone drives. Income is used as a SIU “red flag” but to set rates based on income is ridiculous. These allegations need to be investigated by the appropriate Departments of Insurance and if true, further regulation is required.