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Car insurance rates calculated in an unfair way

In a recent survey carried out by the Consumer Federation of America, the clear majority believed the math used for calculating the current rates for insuring the vehicles we drive are fundamentally unfair. This confirms a continuing swing of opinion against the insurance industry and the way the different insurers assess the risk policyholders will make a claim. Put simply, the consumers think the rates should be based on the ability to drive as proved by the claims history. The insurers believe the better way to calculate risk is to look at a wide range of factors, many of which have nothing to do with driving ability.

 
   

The most controversial factors are the work people do and their educational attainments. It's obviously important to know where people work because of the length of the drive to commute and the density of the traffic likely to be encountered. But deliberately looking for statistical evidence that those who hold lower-paying jobs are more likely to be involved in an accident is unfair. Similarly, the people who hold the lower-paying jobs are likely to have the poorest educational records. Trying to prove poor people have more accidents is to penalize the poor. Now add in the ZIP code. Often the poor have no choice about where they live yet the insurers will load up the auto insurance quotes when drivers live in the "wrong" area. If the poor have low credit scores, this reinforces the negative image of the individuals as irresponsible and more likely to make a claim.

The result is an unfairly high burden placed on the poor. Even though individual drivers may have a clean driving record with no claims, no convictions or tickets, and low annual mileage, they are often quoted higher car insurance rates than those who live in better ZIP code areas, and have middle-class occupations and salaries. Naturally, the car insurance industry disputes this but the practical reality is that the majority of drivers believe it to be true. Sadly, the consumers' disapproval does not translate into any effective action to limit the excess of the insurers.

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