A new report from Insurify, an insurance comparison shopping site, shows that drivers with clean records who live in a majority-Black neighborhood pay almost 20% more for car insurance on average than a driver living in a majority-white neighborhood who has prior driving offenses.
Kacie Saxer-Taulbee, a data scientist at Insurify, tells Yahoo Finance that insurance companies are not supposed to use race as a factor when determining car insurance rates. However, companies are allowed to use other factors that can potentially discriminate against drivers living in certain areas.
“They’re allowed to use other factors such as education level, employment, license status, and insurance history. These factors vary in majority-white, majority Hispanic, and majority Black neighborhoods to no fault of the drivers to set these rates, and those are the result of historically, discriminatory practices.”
Insurify data also shows that there is a 13% increase in car insurance costs for homeowners in black neighborhoods compared to renters in white communities. There is also a 24% increase for car owners with excellent credit in black neighborhoods compared to poor credit in white neighborhoods.
The pandemic and the ensuing economic crisis that followed has impacted car ownership in extraordinary ways, according to Insurify.
Saxer-Taulbee tells Yahoo Finance that the U.S. auto insurance industry provided discounts and relief at the beginning of the pandemic. However, those positive cost measures passed on to drivers have all but faded.
“Fifty-seven percent of them were offering some form of payment relief in the form of a credit or a refund or a discount, usually about 10% to 30% of that driver’s monthly payment. However, those payment relief measures didn’t continue past May for the most part, and almost none of them are still ongoing, even though drivers are still driving less and facing more economic hardship through the pandemic.”
Americans drove 28% fewer miles during spring 2020 than during the same period in the spring of 2019. Despite the reduction of miles driven. However, the fatality rate increased by 23%. Insurify attributes this to motorists driving more recklessly when faced with less congested roads.
Saxer-Taulbee tells Yahoo Finance that the company actually expects auto insurance rates to increase by 6% in 2021.
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.