The Consumer Federation of America (CFA), a non-profit organization committed to advancing consumer interests, has published a report indicating that low-income individuals often pay more for car insurance than their high-income counterparts, even when both parties maintain identical driving records. The report was authored by Douglas Heller, Director of Insurance, and Michael DeLong, Research and Advocacy Associate at CFA.
According to the report, when car insurance companies factor in customers' credit scores while determining insurance rates, consumers with lower incomes often end up paying more for coverage. The report explains that low-income individuals "disproportionately" tend to have lower credit scores than wealthier individuals due to various factors. CFA's analysis of insurance premium data from the ten largest insurers across the country revealed that consumers with fair or poor credit pay "significantly" more than drivers with excellent credit.
Heller commented on the findings, stating, "On average, a consumer with poor credit has to pay twice as much for auto insurance as a driver with excellent credit, even if everything else, including their driving safety history, are the same. Not only is this unfair to safe drivers because of longstanding and institutional biases, but the use of credit history for insurance pricing also leads to disproportionately higher premiums for lower-income drivers and people of color."
DeLong echoed these sentiments, saying, "Your auto insurance premium should be based on your driving record, not your credit score. You shouldn’t have to pay more in premiums because of a factor unrelated to your driving, and as long as companies are allowed to use credit this way, millions of safe drivers in America are being overcharged for their auto insurance."
Investopedia reveals that Georgia residents have one of the lowest average credit scores in the nation. In 2021, the average Georgian's credit score was 694 compared to the national average of 714. Mississippi, Louisiana, Alabama, Oklahoma and Texas were the only states with lower average credit scores than Georgia in 2021.
Founded in 1968, CFA is committed to education, research, and advocacy aimed at advancing consumer interests. The organization's website reveals that it comprises more than 250 non-profit entities.