For at least two decades, Cuqui Rivera of North Brunswick had been free of a car accident. She didn’t get a speeding ticket. Her only interaction with her car insurance company was to write them a check, which she did religiously. She was a model insurance driver.
Or at least she thought she was.
Then, a few years ago, Rivera heard insurance companies weigh things like credit scores, education and employment when deciding how much to charge and she decided to check it out.
When her policy was renewed, Rivera ditched Liberty Mutual and turned to CURE auto insurance, which the company and activists say is the only one in New Jersey that doesn’t factor these items into its rates. . Her annual bill for a car and the same coverage, she said, went from $2,997 to $1,188.
Rivera says she has a good idea why she’s been charged so much more for so many years.
“It’s because I (only) have a high school diploma,” Rivera said.
Most Jersey drivers in a state with more than 5.9 million vehicles might not know that the amount each pays for car insurance isn’t governed solely by their driving record or where they live. residence. Insurers also look at your credit score, what you do for a living, if you’re married, if you own a home, and if you have a college degree.
And these factors can have startling disparities, according to a 2015 study by Consumer Reports.
A janitor with a perfect driving record and terrible credit could actually pay $37 more a year for insurance than a doctor who was convicted of drunk driving but has excellent credit, according to the report. ‘study.
“We had a really hard time getting people to understand,” said Maura Collinsgru of New Jersey Citizen Action. “It’s very difficult for people to understand. It’s not like you get a detailed list, and if you did, I’m sure it would be quite enlightening.
A more recent study showed how rates are determined in New Jersey and most of the country discriminates against minorities.
Proponents of legislation that would ban the use of education, occupation, homeownership status, marital status or credit score to determine insurance rates are cautiously optimistic that upcoming increases in rates for up to 1.2 million drivers with low levels of coverage will breathe new life into the bill, which has been dragging on for years in Trenton.
The New Jersey Insurance Board, a nonprofit group that represents auto insurers in the state, and the state Department of Banking and Insurance, which exercises regulatory oversight over insurers, recognize that companies use these parameters to determine rates. But to what extent is unknown since these are trade secrets.
Liberty Mutual, which had insured Rivera, said it “considers dozens of factors when determining a customer’s overall risk” and is “committed to providing drivers with insurance coverage options cars fair and at competitive prices”. But spokesman Gregory Kessler wouldn’t say how much they weigh on credit scores compared to other metrics, like education level and occupation.
Good government advocates say the current practice is discriminatory. Blacks and Hispanics in the state are more likely to rent instead of own a home, to be widowed, divorced or never married, to have a high school diploma or less and to work in a service occupation , according to a 2020 report from the Consumer Federation of America.
The debate about this has been raging for years in New Jersey. State Senator Nia Gill, D-Essex, sponsored legislation as early as 2006 to ban insurers from using these measures. She is the main sponsor of the current invoice which has not yet had a hearing this year.
Only three states – California, Hawaii and Massachusetts – prohibit credit score as a factor. California, Massachusetts, Michigan and New York prohibit education and employment.
Rivera, a lifelong campaigner, never thought of switching carriers during all those years of paying more every month. Money that could have been better spent on his children and grandchildren. She was not alone.
According to the Consumer Federation of America report, majority-black ZIP codes pay 49.5% higher premiums than majority-white ZIP codes. Majority Latino ZIP codes pay 50% more and low-income ZIP codes pay 51.5% more than majority white.
“They have a really detrimental impact on consumers,” said Michael DeLong, research and advocacy associate for the group. “It just has a very big impact on black and Latino consumers.”
The group compared the rates of a 35-year-old driver with a clean record looking to insure a 2011 Honda Civic in 2020. It showed that people with excellent credit pay an average of $842 per year, compared to $1,384 for those with fair credit, and $2,153 with bad credit. credit. A clean record with good credit versus a clean record with bad credit equals a 156% increase.
The Insurance Council of New Jersey defends the current practice and opposes the bill. Insurers say that overall, these factors predict the risk of motorist claims.
“The ICNJ has a view on the use of risk-based pricing variables and that is that we strongly support allowing their use,” said Christine O’Brien, group president.
“Insurance companies use a combination of many factors to ensure the best rate and ultimately premium for all drivers,” she said. “New Jersey legislation … which seeks to prohibit certain variables fails to recognize that these factors have been repeatedly determined to be actuarially sound, predictive of risk, and not unfairly discriminatory.”
But critics don’t buy it. Including CURE auto insurance CEO Eric Poe, who has long opposed the practice.
“If you’re wealthy and have more assets, you’ll get a better price,” Poe said. “The worst kind of racism is silent political racism.”
Poe said his company opted out of using education, occupation and credit scores after the state allowed insurers to do so about two decades ago.
The Consumer Federation of America’s 2020 report also showed big disparities by where drivers live. Fair credit to Princeton? The 35-year-old driver with a clean record looking to insure a 2011 Honda Civic could expect to shell out $1,200. Moving to Trenton? They would pay $1,851 and if they moved to Newark, that would jump to $2,120. Bad credit in Newark? The cost jumps to $3,376.
Should drivers who live in densely populated cities who don’t park their cars in garages and who might be more prone to being swept away or robbed pay more? Of course, proponents of change agree.
“Density and your zip code would impact your car insurance premium. But the large price differences we’re seeing are far too large to be explained by that,” DeLong said. “Your location should have some impact, but these discrepancies are just too big.”
The cost of driving in New Jersey is rising.
Starting in January, up to 1.2 million drivers who have current $15,000 liability coverage will have to pay more for the new minimum coverage of $25,000. Insurers say that’s about $125 more per year than these people will have to pay.
In 2026, the minimum coverage is expected to increase to $35,000.
More recently, legislation was quietly introduced this would increase bodily injury coverage minimums to $50,000 from $15,000 under current law.
The added costs have some people sounding the alarm about a possible unintended consequence: more people on the road who simply don’t have insurance.
“Forty percent of the people who leave me are uninsured because they just can’t afford it anymore,” Poe said.
“It’s actually worse for everyone because it indirectly increases insurance costs,” DeLong said of fewer insured drivers on the road. “It only makes an already bad situation worse.”
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matt arco can be attached to [email protected]. Follow him on Twitter at @MatthieuArco.