Asbury Park Press

Insurers Charge The Less-Educated More

Seeking new ways to separate good risks from bad, car insurers zero in on your job. The result? It's not ditch-diggers and waitresses getting the discounts.

MSN Money — ca. March 22, 2006

By MSN Money staff

Your driving records might be identical, but if your neighbor has the right job and you've got the wrong one, you could pay hundreds of dollars more for car insurance.

The safe drivers, according to insurers? Biologists, chemists, economists, judges, veterinarians, accountants, architects, lawyers, teachers, engineers and dentists. The worst? Clerks, long-haul drivers and "unskilled and semi-skilled blue- and gray-collar workers."

In states where rating factors can legally include education and occupation, insurers such as Allstate and Geico are now charging drivers with the right kind of jobs much less for insurance.

Allstate discounts premiums by up to 10% for those in its favored jobs. Geico simply charges the less educated more.

Eric S. Poe, vice president of the nonprofit New Jersey Citizens United Reciprocal Exchange, suggests there is no correlation between education or occupation and the likelihood of an individual getting in an accident.

"The insurance industry is not concerned about whether you will have an accident or not," Poe said. "They are concerned as to whether you will want to be compensated for that accident."

Outcry in New Jersey

The Newark, N.J., Star-Ledger reported earlier this month that a 30-year-old single, male lawyer with a master's degree would pay $1,686 a year for coverage from Geico, but $2,880 if he were a janitor with a high school diploma. The newspaper quotes an internal Geico handbook: "Risks who have achieved at least a high school diploma or its equivalent are more favorable than those without a high school education. Bachelors, masters and other advanced degrees are considered most favorable."

"It is really unconscionable," Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, told the newspaper. "I would love to know who they are marketing themselves to. Are they writing letters to doctors and lawyers? Everybody should be putting down that they are Rhodes scholars."

Occupation appears to be a factor in all states where Geico – it's the country's fourth-largest auto insurer – writes policies. New Jersey Consumers United Reciprocal Exchange used the company's online Web quote service to check rates in 43 states for a white-collar professional and a janitor with a high school diploma. The average difference in rates was 40%.

A lawmaker now has introduced a bill that would make New Jersey the first state to prevent insurers from using education to determine auto insurance rates, according to the National Conference of State Legislatures, which searched a database of statutes.

Ten states prohibit the use of driver income, said Miun Gleeson, spokeswoman for the National Association of Insurance Commissioners in Kansas City, Mo.

A break for some

Allstate's study, released last week, looked at 10 million insurance policies over a three-year period and broke down accident claims by profession. The winners, at least in Hawaii, South Carolina, Alaska, Alabama and Idaho, are editors, health technicians and judges, among others. A smaller discount goes to secretaries, teachers, locksmiths, carpenters and artists. Illinois, Minnesota and Wisconsin will offer the discount to police, firefighters and paramedics.

"It's a great example of how Allstate provides consumers with competitively priced insurance based on an individual's risks," said a spokesman for the No. 2 auto insurer, Mike Siemienas. He said that the company had filed to introduce the discounts in other states as well.

A 2004 study, done by Quality Planning Corp., matched Department of Motor Vehicle records with its own database of 14 million auto insurance policies to match incidents, drivers and occupations. It found the worst drivers – students, medical doctors, attorneys, architects and real estate agents – had twice as many accidents as the safest – homemakers, politicians, pilots, firefighters and farmers.

State Farm, the largest car insurer in the country, doesn't use education or occupation to set rates, said spokesman Dick Luedke. The No. 3 insurer, Progressive, also refrains, said spokesman William Perry.

Slicing and dicing

Of course, one man's discount is another man's penalty. It's all part of the game as insurers burn up computing power trying to gauge risk of a claim to the nth degree.

Use of credit histories to determine premiums is the most highly publicized result, but some insurers now track odometer readings, for example, because people who drive less crash less. Progressive is testing a discount to those who agree to have a transmitter record how often, how fast and when their vehicle is driven, along with information about acceleration and braking. Progressive and others are looking at pay-per-mile programs as well.

Each company adopts its own rating system, although there are general guidelines that all companies follow. Your location, marital status, gender, age and the make and model of your vehicle are the most common factors in calculating your likelihood of a claim.

The national average bill for insurance in 2005 was about $930.

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