The California insurance commissioner announced that the state was investigating a questionable gap in insurance costs. People are claiming that insurers are offering discounted rates to people in white-collar professionals in wealthy areas that are not available to people of color in low-income areas.
California Department of Insurance Commissioner Ricardo Lara spoke with CBS about this investigation. “This disturbing data confirms what we have heard for years — that auto group discounts do not apply equally across California,” said Lara. “We are evaluating whether insurer affinity group discounts violate state laws, and I am prepared to act to ensure all Californians have access to affordable auto insurance regardless of their income, education or ethnicity.”
California asked 95 major insurers in the state for data on their car insurance policies. Only 33 of those insurers responded, but combined those 33 represent about 16.5 million insured vehicles.
According to that data, customers who were enrolled in these affinity groups received discounts of up to 25.9% off of their premium costs. The problem becomes more apparent when you discover that 55% of residents from a high-income area were part of these affinity groups, while only 26% of residents in a low-income area were.
California tried to stop unfair insurance practices from occurring in 1988 when it enacted Proposition 103. The legislation made it so that insurers had to base their car insurance premiums based on things like a drivers safety record, vehicle usage and experience. These affinity groups seem to be a violation of that statute.
The investigation is ongoing, which means we may not know the entire truth about this for a while. However, now that the state is involved it’s not unreasonable to expect action in the near future. This is certainly a story to keep an eye on.