Tlaib, Watson Coleman & Takano Introduce Bill Mandating Impact Study of Auto Insurance Discrimination

Oct 07, 2020

WASHINGTON—Today, Congresswoman Rashida Tlaib (MI-13), Congresswoman Bonnie Watson Coleman (NJ-12), and Congressman Mark Takano (CA-41) announced they will introduce the Preventing Auto Insurance Discrimination (PAID) Study Act, which requires the U.S. Government Accountability Office (GAO) to conduct a study on the disparate impacts of automobile insurance companies’ use of socioeconomic, non-driving factors in premium setting and underwriting decisions.

Auto insurance is rife with systemic racism. According to research conducted by the Consumer Federation of America (CFA) over the last seven years, state-mandated auto insurance coverage is disproportionately more expensive for Black drivers than white drivers. Worse, such pricing disparities between Black and white drivers are driven in part by the use of socio-economic, non-driving factors in premium setting that serve as a proxy for race instead of reflecting a person’s driving history, including education, occupation, employment status, credit scores, previous insurer information, zip codes, census tracts, homeownership status, and more.

Tlaib and Watson Coleman previously introduced the PAID Act to ensure insurance companies use only driving records in determining car insurance rates and eligibility. Now, they’re joining forces with Takano to direct the GAO to conduct a study that will demonstrate the need for the PAID Act to become law and prohibit auto insurance discrimination. For Tlaib, whose congressional district suffers some of the highest auto insurance rates in the country, the urgency for action is clear.

“Auto insurance discrimination on the basis of non-driving factors has allowed auto insurers to reap benefits off the financial struggles of so many Americans for far too long,” said Tlaib. “Now, we have a pandemic exponentially exacerbating those financial struggles, with folks being forced to choose between paying for state-mandated auto insurance, keeping a roof over their heads, or food on the table through no fault of their own. I thank Reps. Watson Coleman and Takano for co-leading this effort to have the real world impact of auto insurance discrimination finally studied—and demonstrated—so that we can finally get our residents the relief from this discrimination they deserve.”

“We have to start to acknowledge that we’ve allowed systems in this country to decimate the earnings and lives of those least able to afford it or speak out for themselves. Car insurance practices are part of the problem – it’s an absolutely necessity for most American families, and many of them are being charged higher rates for unfair, undisclosed, and unproven reasons,” said Watson Coleman. “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. I’m proud to work with my colleagues Reps. Tlaib and Takano on legislation like this and the Prevent Auto Insurance Discrimination Act that will give every American a fair shot.”

“The fact that minority neighborhoods pay higher car insurance premiums than predominantly-white areas once again highlights the systemic racism that is so deeply rooted in our country,” said Takano. “My colleagues and I have come together to demand that the Government Accountability Office conduct studies of automobile insurance coverage so we can begin to address the problem at hand. If we want to create a more just, more equal country, we must not tolerate discrimination of any kind.”

The study bill has earned the support of two organizations that have also been leading the charge on getting the issue of auto insurance discrimination addressed: CFA and CURE Auto Insurance, both of which offered powerful testimony regarding the issue before the House Financial Services Committee during a hearing titled “Drivers of Discrimination: An Examination of Unfair Premiums, Practices, and Policies in the Auto Insurance Industry” this past March.

“Government requires that drivers buy auto insurance, so there is a special obligation to make sure premiums are affordable and priced in a fair manner. But most insurers base rates on socio-economic characteristics that say more about a customer’s race and income than about their driving safety,” said CFA Insurance Expert Douglas Heller. “The insurance industry and most state regulators have been unwilling to confront the fact that auto insurance pricing in America is both impacted by and contributes to structural racism. Because of this, even with perfect driving records, the poor pay more and Black and Brown drivers pay more for mandatory auto insurance coverage. If lawmakers and regulators think additional data and evidence are needed to move this industry toward fairness, then we should begin that effort now. Consumer Federation of America is deeply appreciative of Representative Tlaib’s leadership and sense of urgency on this issue.” 

“I think this study is long overdue,” said CURE Auto Insurance COO Eric Poe. “Until it is banned, my industry will continue to adopt income-correlated, non-driving factors in their rates because wealthier drivers are simply more profitable to them.”  

Reps. Tlaib, Watson Coleman, and Takano’s introduction of the PAID Study Act comes two weeks after Senator Corey Booker’s (D-NJ) introduction of a Senate companion bill to Tlaib and Watson Coleman’s PAID Act.

Full text of the bill, which will officially be introduced Friday, can be found here.

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