GEICO Sued for Charging Blacks More for Auto Insurance
Rueter’s News reports that GEICO’s friendly little gecko is going to need to hire a lawyer:
Three former policyholders of auto insurer GEICO Corp. filed a federal lawsuit on Monday accusing the company of discriminating against blacks by using education and employment status as factors in setting auto insurance rates.
It said that because black policyholders are “significantly less likely” than whites to hold jobs requiring advanced education, GEICO knew that using occupation and education levels to set insurance rates would result in blacks being charged more than whites with similar driving records.
The lawsuit, which seeks class-action status, accuses GEICO of intentional discrimination against blacks, and concealing its practices from policyholders and insurance regulators.
All insurance companies are allowed to ‘discriminate’ on certain characteristics - usually age, sex, driving record, type of vehicle. The reason for this is because people of different ages, i.e. the very young and the very old, cause more accidents per capita than the average driver. Men cause more accidents than women (only because they drive twice as much is my theory), and people that drive sports cars are more likely to cause an accident than a soccer mom in a mini van.
Some companies have started to ‘discriminate’ based on credit scores. Statistically people who have better credit have fewer accidents. The explanation I have heard is that if you are not paying attention to your bills you probably are not paying attention to your driving either.
So, the first question is - should insurance companies discriminate at all? Or should they charge everyone one rate? Should a 20 year old guy who has a DUI and 6 speeding tickets and drives a corvette get charged the same as a soccer mom with an astro van who has never even been pulled over?
If insurance companies are able to figure out who has the least chance of having an accident and are allowed to give them the best price (aka discriminate) then what factors should be allowed?
And what if it could be proved that a single race attributed to 50% of all accidents? Would it be right for every other driver to have to pick up their share? Would it be discrimination if it is ‘charging the right premium’ for the risk - which is what insurance is supposed to do?
The problem with this law suit is that GEICO does not discriminate based on race - but on factors that supposedly affect blacks more than whites. For this reason I don’t think GEICO will lose this case.
Dad, I have to admit I’m surprised you posted that image of the hawk on your website. ; )
Comment by Geoff Paulson — April 6, 2006 @ 4:16 pm
Why Geoff? Are you prejudiced against hawks?
Yes, the caption is not anything I would normally type, but the picture was is worth a thousand words, so I thought it might outweigh the one bad word.
Comment by Gary Paulson — April 6, 2006 @ 5:13 pm
I think your right, but the whole notion that a lawsuit of this nature is even being entertained is preposterous.
Oh please!! So, this week it’s GEIKO’s fault that blacks are uneducated and have low incomes?? There are a lot of white, hispanics, and asians that are also subject to GEIKO’s rate determination scheme. Where’s the discrimination?
I got a speeding ticket today….obviously the police are discriminating against drive that go over the speed limit. Such Bs..
Comment by wheresjbob — May 3, 2006 @ 7:06 pm
It is sad that our litigious society makes it profitable for people to pursue law suits like these. I would almost bet money that the people who are behind this law suit do not believe it is discriminatory to blacks. They either want the publicity or they want GEICO and others to remove credit scoring from being a factor for auto insurance rates and figured this was their best avenue of attack.
Very similar to people using ‘protecting the children’ in other lawsuits. Who could be against it?
Comment by Gary Paulson — May 6, 2006 @ 8:31 am
“All insurance companies are allowed to ‘discriminate’ on certain characteristics - usually age, sex, driving record, type of vehicle. The reason for this is because people of different ages, i.e. the very young and the very old, cause more accidents per capita than the average driver. Men cause more accidents than women (only because they drive twice as much is my theory), and people that drive sports cars are more likely to cause an accident than a soccer mom in a mini van.”
I think GEICO should definitely change its practices. Basing insurance rates on someones education level has NOTHING to do with how they drive!
Comment by Highway Traffic Tickets — February 15, 2008 @ 2:09 pm
If an insurance company has statistics proving that a 30 year old male with a PHD has fewer accidents than a 30 year old male with only a high school diploma, should they be able to give the PHD a break on his rates?
Comment by YeOleImposter — February 23, 2008 @ 11:07 am
I try some insurance companies, and I never felt discriminated.But I don’t think that insurance companies must discriminate any person. It doesn’t matter if the have money, they are white, or they have a higher level of educacion.3
Comment by Insurance — March 5, 2008 @ 11:50 am
it goes to show you that even with very large , apparently well known and popular ,companies even like Geico discrimination can raise its ugly head. Its not only a question of money when it comes to insurance - be it auto , house , home ,life or property insurance.
Comment by Saper Insurance — May 11, 2008 @ 2:52 am
I don’t know that they were discriminating, that is the point of the post.
Comment by YeOleImposter — May 13, 2008 @ 4:28 pm
I disagree with the comments about discriminting against someone because of their grades. Young drivers get a discount if their grades are good and I’ve got no problem with that.
Insurance companies only look at risk, and if they find that students with good grades are statistically safer drivers, then the students should pay less.
[Editor’s Note: I have removed the URL in this post since it appears this may be spam, It is close to the topic at hand but nobody mentioned students or grades in the post or the comments]
Comment by Car Insurance For Teenagers — May 29, 2008 @ 10:45 am
I think as long as you are “discriminating” by individual traits that can be demonstrable to show an increase or decrease in accident rates then it is ok. The insurance companies have been having trouble proving that credit reports have ANYTHING to do with accident rates. However men drive much more aggressively then women (sorry), especially young women and have clearly higher rates of car accidents per mile. So if blacks have clearly demonstrable higher rates of accidents then whites overall I don’t care if it is not politically correct, I don’t want to pay for their bad driving.
Comment by Julie Davis — June 14, 2008 @ 9:06 am
Yeah, I think they should discriminate. If there is statistical evidence that shows a relationship between a certain trait and accidents, that that should be considered. They already discriminate on some traits, so why pick and chose. If you can discriminate on one trait, they should all be fair game.
Comment by Nashville DUI Guide — July 10, 2008 @ 9:13 pm
The truth is that this does happen. Just changing the status in the app from High school to Bachelors degree on the app will cause a huge rate increase, or change in company placement. Here is the problem, a 25 year old with a degree and a dui will get a better rate than a 50 year old school bus driver that has never gotten a ticket of accident. the system clearly discriminates against people who have started out with either less opportunity or who chose at a young age to peruse a trade or career of their choice. If you don’t think GEICO discriminates against race consider that they offer no services to Spanish speaking Americans. legal or not. Ok I know you will say that people should learn to speak the language. but is it good business to require them to speak the language in order for them to do business with you.?
Comment by john doe — August 6, 2008 @ 7:32 am
So are you saying that most 50 year old school bus drivers are black? Or that there are no 25 year old blacks with a college degree? Sounds like racial profiling to me.
Also, why would a 50 year old school bus driver (black or white) have bad credit? Poor money habits have to do more with what you do with the money you have not with how much you actually make.
Comment by YeOleImposter — August 6, 2008 @ 8:16 pm
this is not fair
an insured’s premium in any case should be based on risk factors - not arbitrary assessments by the insurer - its management or even actuaries or even direct insurance agent on the ground or in the field as opposed to actual risk assessment factors - in this case being the driving record and accident reports on the person or persons applying for the auto insurance
Comment by Saper Agency — August 9, 2008 @ 2:30 am
I am not sure how you define risk factors. These are not ‘arbitrary assesments’. The companies have statistical evidence that shows that people with poor credit submit more claims than people with good credit.
Speaking of arbitrary and unfair — companies since the beginning have charged males more than females, single more than married, etc. These are just as ‘arbitrary’.
The only reason not to allow companies to use credit factors is if society wants those with good credit to subsidize the insurance of those with poor credit and since most who argue against using credit try to paint this as rich vs. poor — maybe they think of this as another way of redistributing wealth.
Comment by YeOleImposter — August 9, 2008 @ 7:40 am
There may be legitimate reasons for doing this. Maybe this community of people are known for more auto accidents than say another community. However i think its really generalization. There are very good black drivers and poor ones, and very good white drivers and poor ones. So i believe each person should be treated as an individual rather than being classed by colour.
Comment by Auto Insurance Guru — August 10, 2008 @ 8:58 pm
Did you read the article? No where did GEICO single out drivers by race. They used “education and employment status as factors”. The person suing GEICO said that this was a hidden way to discriminate against blacks.
Comment by YeOleImposter — August 11, 2008 @ 10:56 am