What factors should be used to determine a person’s car insurance rate? Factors such as their age and gender make sense. Even the type of car they drive, where the car is parked, and their driver classification (commuter, business use, or pleasure driver) should be factored into the rate determination. But should socio-economic factors, such as a person’s education or occupation be considered? What about a person’s marital status?
Car insurance companies have used socio-economic data to determine car insurance rates for years. The Consumer Federation of America released a report earlier this year stating car insurance companies vary their rates based on a person’s marital status. Their findings showed married couples pay less for car insurance than individuals who are single, divorced, or widowed. Rates varied by 3% to 29% depending on the company. In addition, some companies also charge more for domestic partner partners than married couples.
This raises the question as to whether or not this practice is fair. Insurance companies point to a 2004 study which they cite as evidence single people have higher driving injury rates than married people. The only problem with this study is that it uses data gathered in New Zealand in 1990 and involved only 138 injuries which included a substantial minority of motorcycle drivers. The difference between married and non-married was 1%.
The New Zealand data is based on too small a sample size, is 25 years old, and from another country. This study should not be the basis for using of marital status as a factor to determine car insurance rates in America. Like the other socio-economic factors, marital status doesn’t truly measure a person’s driving risk. It is these risks which should constitute the basis for what people pay for car insurance.
To be fair, I also don’t think that Consumer Federation of America study went far enough. Their study only measured car insurance rates from six companies (Geico Progressive, State Farm, Farmers, Nationwide, and Liberty Mutual) by obtaining different insurance quotes in 10 cities. I believe they could have produced a much better report if they’d measured rates from the top 15 car insurance companies with quotes from the top 75 to 100 cities across the country.
I don’t think the use of a person’s marital status is a great measure of risk nor is it fair. I discovered this personally when I changed careers over 11 years ago. At that time, I was recently separated and ended the year divorced. My car insurance rate did increase, however, my marital status was just part of the reason. Being divorced, meant I lost out on two large discounts too – the multi-vehicle and auto / home discounts.
I personally understand how unfair this may seem for anyone who’s lost a spouse or gone through a divorce. I don’t believe a person’s marital status should be used to determine their car insurance rate. In order for this to change though, a lot of Texans will need to inform our state legislatures and the Texas Department of Insurance this practice should stop! What do you think? Share your thoughts with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!