The Detroit Bureau
“Inhumane” penalty for newly widowed women.
by Paul A. Eisenstein on Jul.27, 2015
Some auto insurance companies rates on widow as much as 226%, according to a new study.
Losing a spouse is never easy, either emotionally or financially, and a new study finds that many major auto insurance companies are adding to the grief by raising rates for new widows by as much as 226%.
In general, auto insurers levy penalties, in the form of higher premiums, on those who aren’t married, according to new research by the Consumer Federation of America. The higher rates are not backed up by data showing increased risk, the consumer group claimed.
“It seems inhumane for insurers to raise rates on women who have become widows,” declared CFA Executive Director Stephen Brobeck.
But former Texas State Insurance Commission Robert Hunter, now the CFA’s Director of Insurance, said many of the insurance industry’s practices when it comes to pricing, are invalid and likely “violate actuarial standards.” In recent months, the organization has also attacked the way insurers have been putting more and more emphasis on socioeconomic data, such as a motorist’s credit score, and less on traditional factors like tickets and accidents.
The latest study focused specifically on how insurance companies adjust rates according to a customer’s marital status. It looked at six major insurance firms: State Farm, GEICO, Farmers, Progressive, Nationwide and Liberty. The study then compared rates for two women, one aged 30, another 50, with otherwise perfect driving records, in 10 major cities.
All but State Farm penalized a new widow an average 20%. GEICO, meanwhile, added a premium of as much as 226%, in part depending upon which of the cities a woman lived in.
More broadly, the study concluded that for most companies, and in all of the cities but Tampa, rates automatically were higher for a women who was single, separated, divorced or widowed, though there was “a great deal of variation” by insurer and location, noted Brobeck.
Farmers, for example, will charge a single, separated or divorced women as much as 34% more than a married women with all other factors being equal.
“It’s hard for us to imagine why becoming a widow makes you a worse driver,” said Hunter, adding that the CFA found it difficult to make any direct correlation between driving risk and marital status. The same was the case with most of the other socioeconomic factors the consumer group has looked at as part of an ongoing study of insurance industry pricing.
In previous reports, the CFA revealed that lower income motorists and those with lower-than-average credit scores were routinely charged significantly higher premiums than wealthier motorists and those with higher credit ratings. Meanwhile, CFA also found that insurers seldom adjust rates for those who clocked lower mileage each year even though there is a correlation with fewer accidents.
According to Hunter, a trained actuarial, the insurance industry has been moving away from the traditional approach of basing premiums on known risk factors, such as the number of tickets a motorist has, and whether they have been involved in accidents. There is more and more use of what he described as “spurious” data for which it can be difficult to show a real cause-and-effect.
During a telephone news conference, the two CFA officials suggested that companies may be favoring wealthier married couples simply because such customers are more likely to insure multiple vehicles – as well as their homes.
Read the article in The Detroit Bureau
