U.S. Rep. Rashida Tlaib has introduced a bill that would prevent insurance companies from using non-driving factors to determine rates.
The Prohibit Auto Insurance Discrimination Act would provide relief to Detroit drivers, who have the highest rates in the nation, largely because non-driving factors are considered.
If passed, the bill would bar insurance providers from calculating rates based on ZIP code, census tract, gender, education, occupation, employment, homeownership, credit score, and marital status.
In Detroit, those factors weigh more heavily on drivers’ rates than their driving record.
PAID goes much further than a state bill signed by Gov. Gretchen Whitmer in May. The Michigan legislation ended the requirement that auto insurance providers guarantee unlimited lifetime medical benefits. Now, drivers are permitted to purchase plans without unlimited medical benefits.
Tlaib said she partnered with Rep. Bonnie Watson Coleman, D-N.J., to introduce PAID because the bill in Michigan and those other states “do not go far enough to stop these harmful practices” of using non-driving factors.
“Auto insurance rates should be determined by your driving record, not your credit score, gender, marital status, education, residence, or any other non-driving factor that has nothing to do with your safety on the roads,” Tlaib said. “Drivers in Michigan’s 13th congressional district face some of the highest car insurance rates in the nation, and non-driving factors that serve as proxies for race and income and allow modern-day redlining are a main culprit. The use of non-driving factors puts marginalized communities at a disadvantage and creates obstacles to economic opportunity for families.”
Coleman said non-driving factors result in higher rates for people who are the least able to afford insurance.
“Car insurance is absolutely necessary for most American families, so when companies raise rates for unfair, undisclosed, and unproven reasons, families are going to be hurt,” Watson Coleman said. “Income proxies like where you work or whether you have a college degree don’t weed out bad drivers — they just create a two-tier system where those who make less get charged higher rates. Working families deserve better than a system that is fundamentally unfair.”
A University of Michigan study concluded that high auto insurance rates lock Detroiters into a “cycle of poverty.”
The average annual premium is $5,414, compared to $1,427 nationally. As a result, Detroiters on average spend 18 percent of their income on auto insurance. In some Detroit ZIP codes, auto insurance soaks up 36 percent of drivers’ income.
Anything beyond 2 percent is “unaffordable,” according to the U.S. Treasury Department’s Federal Insurance Office.
It’s no wonder, then, that an estimated 60 percent of Detroiters drive without insurance. That’s compared to 13 percent nationally. About a third of Motor City residents don’t even own a car.
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