If you drive a car, you probably already know that your driving record affects the amount you pay for auto insurance. But what you might not realize is that that price you pay can be greatly affected by purely demographic information — like your zip code.
A landmark 2015 study by the Consumer Federation of America showed that a good driver living in a primarily black neighborhood was likely to be charged 70% more than a similar driver in a white neighborhood. This effect was seen even after accounting for population density and income levels. The reason, according to the insurance industry, was risk, meaning that the number of claims and their cost drive up insurance in those neighborhoods, even for motorists who have never been involved in a collision.
Now a new, first of its kind analysis by our colleagues at Consumer Reports and ProPublica has shown that some insurers charge, on average, higher liability premiums in predominantly minority zip codes than in similarly risky non-minority zip codes. In some cases, ProPublica and CR say that major insurers were charging premiums that were on average 30 percent higher in zip codes where most residents are minorities than in whiter neighborhoods with similar accident costs.