California Department of Insurance Investigation Finds USAA & Nationwide Calculated Auto Rates Incorrectly, Resulting in Higher Rates in Minority Neighborhoods

The California Department of Insurance announced today that an investigation by the agency determined that Nationwide and USAA had submitted rate plans for the upcoming rate period that calculated auto premiums improperly, resulting in higher rates for drivers in minority communities. The Department has required the companies to submit new rate plans to ensure drivers living in predominantly minority zip codes are not charged higher premiums than drivers in white neighborhoods with comparable risk.

The Department’s investigation was prompted by an analysis released earlier this year by Consumer Reports and ProPublica, which found that eight insurance companies were charging minority zip codes in California more than 10 percent higher premiums on average than non-minority zip codes with similar levels of risk.

According to a story posted today by Consumer Reports and ProPublica and written by ProPublica’s Julia Angwin and Jeff Larson, “The regulators said their review confirmed our finding that linked pricing disparities to incorrect applications of a provision of the law….The department said that the adjustments would largely erase the racial disparities we found in the two companies’ pricing. According to our analysis, USAA charged 18 percent more on average, and Nationwide 14 percent more, in poor, minority neighborhoods than in whiter neighborhoods with similarly high accident costs.”

The regulators indicated that they were still investigating the proposed rates of Liberty Mutual, which had the largest disparities in the ProPublica – Consumer Reports analysis. Consumers Union, the policy and mobilization division of Consumer Reports, praised the Department for working to ensure fair premiums in the future and called on the agency to review past rate filings by the companies to determine whether drivers in minority neighborhoods were charged more than can be explained by risk.

“California deserves credit for investigating this issue and making sure insurance companies are following the law,” said Christina Tetreault, staff attorney for Consumers Union. “Now it should take a closer look at past rate filings and hold companies accountable if drivers in minority neighborhoods were charged more than could be justified by risk.”

The ProPublica – Consumer Reports analysis…

Read the full article from the Source…

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