Drivers in predominantly Black and low-income areas of New York City are spending thousands more on auto insurance than residents of mostly white, affluent neighborhoods.
According to Gothamist, an analysis by the Consumer Federation of America, which released its report Wednesday, found that residents with perfect driving records and excellent credit scores who live in Brooklyn’s predominantly Black communities with low median incomes pay the highest rates. In Brownsville, for example, drivers have annual premiums that on average are $2,500 more than those of their white counterparts on the Upper East Side.
The American Property Casualty Insurance Association’s vice president, Kristina Baldwin, said most states permit using credit history to determine auto insurance rates. She contended there is a “high correlation” between credit-based insurance scores and the propensity to file claims.
The Consumer Federation used motor insurance rate data from August 2020 for each ZIP code from 10 auto insurers, which accounted for nearly 80 percent of the New York insurance market.
The nonprofit advocacy group discovered that drivers who live in five Manhattan ZIP codes around the Upper West Side, Upper East Side and Midtown East — areas with a preponderance of white, high-earning residents — pay the lowest insurance rates.
“We’ve got a systemic bias in so many aspects of our financial and socioeconomic life,” report co-author Douglas Heller said, Gothamist reported. “When we require people to buy a product like auto insurance, we need to do better.”
Consumer activists and state legislators are fighting insurance providers’ use of credit scores to determine policy prices, calling the practice unfair and discriminatory. They contend that enabling insurance companies to consider non-driving variables, such as credit ratings, leads to higher premiums for low-income drivers and persons of color, even when they have perfect driving histories.
The Consumer Federation estimates that almost 95 percent of vehicle insurers in New York base their rates on credit scores. It noted that drivers with low credit ratings might have faced a job loss or an unexpected medical expenditure.
Assemblymember Crystal Peoples-Stokes and state Sen. Kevin Parker of Brooklyn have presented legislation that would forbid insurers from calculating vehicle insurance costs based on drivers’ credit history.
“So here we are in a country that’s supposed to be the greatest in the world,” Peoples-Stokes said in a virtual press conference, according to Gothamist, “yet we allow businesses to keep people poor and to punish people because of their decisions about where they would like to live.”
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