Renters Charged Higher Premiums for Auto Insurance than Homeowners, says Consumer Group
Image: NCCC

Renters Charged Higher Premiums for Auto Insurance than Homeowners, says Consumer Group

Of the nation's largest insurers, Geico was the only company that did not factor homeownership.

February 9, 2016

An analysis from the Consumer Federation (CFA) found that most large insurance companies are charging higher premiums for renters than for homeowners regardless of driving record.

Based on a sampling of insurance quotes across the country for a 30-year old safe driver, CFA found that premiums averaged 7 percent higher – about $112 per year – for drivers who rent instead of own homes. Liberty Mutual penalized renters the most with premium hikes averaging $307 per year, or 19 percent more, for state mandated auto insurance coverage.

Of the nation's largest insurers -- State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual, and Nationwide – Geico was the only company that did not factor in homeownership.

This especially hits low- and moderate-income Americans who tend to rent rather than buy their homes. Federal Reserve Board data show that the median income of renters in the U.S. was $27,800 in 2013 compared with $63,400 for homeowners.

"To raise people's auto insurance premium because they can't afford to buy their homes unfairly discriminates against lower-income drivers," J. Robert Hunter, CFA's insurance director, said in a written statement. "A good driver is a good driver whether she rents or owns her home. Insurance companies should not be allowed to target people based on homeownership status."

For the analysis, CFA tested rates for minimum limits liability coverage in 10 cities. Researchers used company websites to solicit two premiums in each city for a 30-year old female motorist who has a 2005 Honda Civic and a perfect driving record. The only characteristic that was altered during the testing was whether she owned or rented her home.

While the average increase for renters was 6 percent, there were several double-digit percentage increases around the country. For example, Allstate charged renters in Tampa 19 percent more than it charged homeowners; Liberty Mutual charged Baltimore renters 23 percent more and 26 percent more in Newark; and Farmers Insurance charged renters in Louisville 47 percent more (or $768) than homeowners for a basic auto insurance policy.

The only premium decrease for renters was found in Chicago, where Allstate lowered rates by 11 percent compared with premiums for homeowners.

Consumer protection laws in California prohibit auto insurance companies from considering customers' homeownership status or other socio-economic factors such as level of education or credit score when setting premiums. Instead, companies must prioritize driving safety record, annual mileage, and years driving experience when setting customers' premiums.

CFA tested rates in Oakland, CA and found that all companies did in fact following the law.

In conjunction with the release of this new analysis, CFA is calling on state insurance commissioners and lawmakers around the country to prohibit insurance companies from penalizing good drivers based on their status as renters. According to CFA, homeownership status is a method by which insurance companies assess customers' income rather than driving risk and should not be used as a factor in determining premiums.

"Virtually every state requires drivers to buy insurance, but we shouldn't force them to buy a home in order to get the best price. State insurance commissioners and elected representatives should step in and stop this practice," said Hunter.

Related Stories

Study Finds Car Insurance Premiums Higher for Single, Widowed Drivers than Married