Why Black Drivers Pay Higher Insurance Bills

Study questions insurance industry's 'risk' calculation when setting rates
By Linda Hervieux,  Newser Staff
Posted Apr 9, 2017 10:36 AM CDT

Drivers in predominantly black neighborhoods in four states paid an average of 30% more to insure their cars than those in white neighborhoods, a new study finds. While it has long been known that African Americans pay more to keep their cars on the road, the analysis conducted by ProPublica and Consumer Reports questioned the insurance industry's contention that premiums for liability insurance are determined by risk of accidents. After studying premiums and claims paid out in California, Illinois, Texas, and Missouri from 2012 to 2014, the nonprofits found that drivers in minority zip codes paid as much as 30% more than white drivers living in areas with similar risk. ProPublica says the "disparity may amount to a subtler form of redlining," meaning denying services to minorities. In this case, many non-white drivers who need their cars to get to work are struggling to pay sky-high bills.

One black driver, Otis Nash, pays $136 more each month than a white man living in an area of Chicago deemed a higher insurance risk. "You just bite the bullet and go with it," Nash says. But California insurance regulators called the report "flawed," and the insurance industry dismissed it as a "weak" oversimplification of the rate-setting process. "There is no unfair discrimination, intentional or unintentional," says James Lynch of the Insurance Information Institute, per the New York Times. But ACLU attorney Rachel Goodman tells ProPublica the findings "fit within a pattern that we see all too often—racial disparities allegedly result from differences in risk, but that justification falls apart when we drill down into the data." (A study found Walmart deliberately runs better stores in white areas.)

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