According to figures compiled by the Consumer Federation of America, low to mid-level income Americans may be paying too much for their auto insurance policies, a situation which lowers their employment opportunities because they cannot legally drive an uninsured vehicle. On average, this class of driver pays $700 and up for their auto coverage.
Insurers rely on a variety of factors to determine premium levels including the location of the primary residence, the driver’s occupation, and their level of education. Insurers insist that when taken as a whole, these facts contribute to the degree of risk associated with the driver’s operation of a motor vehicle.
Stephen Brobeck, CFA president, said in a statement accompanying the release of the study, “As a society, we must figure out a way for lower-income families to purchase affordable liability coverage so that they don’t face the choice between breaking the law and giving up access to job opportunities.”
Unfortunately, this is too often a case of presumed “guilt” on the part of the car owner rather than innocence. One option for low-income drivers is to investigate the newly emerging class of “pay as you drive” coverage.
This insurance model includes the installation of a device on the car to collect data about miles driven, the time of day the car is in operation, and rate of speed. It may also look at behavior like abrupt stops and accelerations.
The policy’s premium levels are tied to actual driver behavior, which the motorist can monitor on the company’s website. Studies have shown that already safe drivers become even safer when they can see data about their own habits behind the wheel.
The “pay as you drive” model offers one solution to what would appear to be a “class-based” insurance dilemma. Every state in the union except New Hampshire and Wisconsin require motorists to carry insurance. Given the effects of the on-going recession, more drivers are having to weigh the dangers of breaking the law and driving uninsured because they cannot afford their auto insurance premiums.
The CFA study, “Lower-Income Households and the Auto Insurance Marketplace: Challenges and Opportunities” can be accessed at consumerfed.org.