A national consumer group says people who drive less aren’t getting the price breaks they deserve from most of the big auto insurance companies.
A new study by the Consumer Federation of America (CFA) found customers who drive less than 5,000 miles a year may not get any discount at three of the five largest auto insurers – Farmers, Progressive and Allstate – unless they live in California, where mileage is required to be used as a rating factor.
State Farm was the only big insurance company that consistently gave a significantly lower price quote to low-mileage drivers.
“The failure of most major insurers to use mileage to help determine prices discriminates against lower-income and older drivers and in doing so also increases the number of uninsured drivers,” said Stephen Brobeck, CFA’s Executive Director. “This lack of concern for mileage, along with an emphasis on other non-driving factors such as occupation and income, help explain why insurers charge many lower income drivers such high prices for minimal, state-required liability coverage.”
The insurance industry says it does not discriminate against anyone.
Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute (an industry trade association), told NBC News that mileage may not be as important as some believe.
“Auto insurance companies want to get the best match they can between the premium they charge and the risk they assume,” Weisbart said. “And in some cases miles driven is a helpful factor but experience suggests there are lots of other things that need to be taken into account.”
How was the price survey done?
CFA did its price shopping on the State Farm, Allstate, Progressive, GEICO and Farmers websites. They requested the minimum, state-required liability coverage in 10 major urban areas for a hypothetical moderate-income woman with a perfect driving record. She was a single, 30-year old bank teller with a high school degree who rents a house and drives a 2005 Honda Civic. CFA compared price quotes for annual mileage of 5,000 and 20,000.
“Regulators must ask tough questions about why insurers are not using mileage right now and insist that it be used."
The results: Farmers, Progressive and Allstate often or always quoted the same annual premium for both driving scenarios, except in California. Farmers and Progressive didn’t even ask for mileage. Progressive’s usage-based Snapshot program offers some customers a mileage discount if they allow onboard tracking of miles and other driving factors. State Farm’s quotes were generally 13 to 20 percent less for the low-mileage scenario.
NBC News contacted all five insurance companies named in the survey. Jeff Sibel, a public relations representative at Progressive, said in an email that “mileage in and of itself is not highly correlated with risk of loss.” Based on 13-billion miles of driving data collected from Snapshot, Progressive has learned that “how you drive is more important than how much you drive,” he wrote.
Farmers referred us to the Insurance Information Institute – which questioned CFA’s findings and conclusions. The other companies did not respond.
Former Texas insurance commissioner J. Robert Hunter is CFA’s director of insurance. During a telephone news briefing on Thursday, Hunter said driving-related factors, such as mileage, are less important than they used to be as insurance companies rely more on big data – such as credit scores, education and occupation – to set prices. He said this is being done because it benefits the insurance companies, not their customers.
'Deemed fair by most Americans'
“Annual mileage is one of the few factors available in auto insurance pricing that is not only strongly related to accident claims but deemed fair by most Americans,” Hunter said. “Regulators must ask tough questions about why insurers are not using mileage right now and insist that it be used. If State Farm can do it, so can the other insurers. If California can require it and it works, so can other states.”
Something to note when looking at the survey results: the importance of comparison shopping. Mileage discounts don’t always result in the best price.
CFA’s hypothetical low-mileage driver in Baltimore received a price quote of $2,080 from State Farm – that’s a 15 percent discount. But the quote from Allstate, which did not offer a low-mileage discount, was still significantly less at $1,352.
The bottom line: You might get a discount from one company, but a better price from another – and that’s what really counts. They only way to know is to shop around.