Systemic Racism in Auto Insurance Exists and Must Be Addressed

Structural racism is being maintained in auto insurance, making state-mandated auto coverage more expensive for African American drivers than it is for white drivers, according to CFA research. The pricing disparities are driven in part by the use of several socio-economic factors in premium setting that do not reflect personal driving history but are proxies for race.

Over the past decade, CFA has issued several reports showing that auto insurance rating factors linked with individuals’ socioeconomic circumstances raise premiums for lower-income customers with clean driving records. What regulators, policymakers, and insurance companies must also acknowledge and address, according to CFA Director of Insurance J. Robert Hunter and Insurance Expert Douglas Heller, is that these socio-economic factors, which have nothing to do with driving, also disproportionately harm African-Americans.

“In every state, unfair discrimination is illegal, yet, on average, African American drivers still pay more for the exact same insurance coverage as white drivers,” Hunter said. “As long as insurance companies continue to use these proxies for race when setting rates, the industry will remain a part of the problem as will the regulators who allow it.”

Based on extensive testing and reviews of publicly available regulatory filings across the country, CFA has found that most auto insurance companies use at least some of these non-driving factors to lower or raise rates for drivers with that particular characteristic. For example, auto insurance companies often charge higher premiums to:

  • safe drivers who rent their home than they charge to those who own;
  • single customers than they do to married ones;
  • drivers with less education than they do to those with more education;
  • blue collar workers than they do to white collar professionals; and
  • those with lower credit scores.

African-Americans are disproportionately represented in the higher premium categories. (See the table below.) The result of these practices is documented in a 2015 CFA report which found that ZIP codes with predominantly African American residents face premiums that are 60% higher than predominantly white ZIP codes, after adjusting for population density.

“When insurers base premiums on drivers’ socio-economic status, they are invariably doing so in a manner that disproportionately targets African Americans with higher prices,” Heller said. “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.”

As insurance commissioners begin to step up to address this structural discrimination, Hunter and Heller suggest steps that could be taken to begin the process.

  • State insurance commissioners should step in and prohibit the use of factors that have a disparate impact on drivers of color;
  • Where regulators do not take action, lawmakers should prohibit the use of factors that make auto insurance more expensive for African American drivers; and
  • Companies should identify and eliminate pricing systems that systematically cause African Americans to face higher premiums than white drivers.

“To truly reform the insurance market, the whole rating process should be placed under a microscope in order to end racially discriminatory pricing,” Hunter and Heller concluded.



Consumer Federation of America (CFA) is a non-profit organization advancing the consumer interest through research, advocacy, and education.

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Consumer Federation of America

Consumer Federation of America (CFA) is a non-profit organization advancing the consumer interest through research, advocacy, and education.