The surprising auto rating factor that can increase premiums by 64%

Many factors can influence an auto insurance quote, but a new survey from Bankrate reveals one that carries huge weight.

Insurance News


There are a significant number of factors that decide how much an auto insurance customer will pay for coverage, but few non-driving related pieces hold as much sway as geography.

According to a new survey from Bankrate, a customer’s ZIP code can create as much as a 64% increase in auto insurance rates. In fact, the same profile located just a few blocks away can vastly impact the quote a shopper may receive from a carrier.

To investigate this, Bankrate researchers compared six-month auto premiums in 10 of the largest US metro areas, based on three hypothetical profiles: a 30-year-old single man driving a 2013 Toyota Camry, a 30-year-old single woman driving a 2013 Toyota Camry and a 45-year-old married couple with two teens at home – an 18-year-old daughter and a 19-year-old son. They drive a 2014 Nissan Pathfinder and a 2012 Nissan Altima.

Then, the same profiles were used to compare quotes based on two home addresses separated by just three-tenths of a mile. The survey focused on zip codes identified by the Pew Research Center as being in a relatively poor area and a relatively wealthy area.

While researchers found that the wealthy areas didn’t always garner the lowest rates, zip codes still play a large role in determining what consumers pay for auto insurance – all else being equal.

The most extreme example was that of a 30-year-old male who could pay 64% more in one area of Chicago versus another. In this case, a five-minute walk from house to house meant a change from $269.95 for six months of coverage versus $442.89 for the same policy from the same insurer.

Robert Hartwig, president of the Insurance Information Institute, said zip codes alone do not matter – the risk profile of the area does.

“It’s not zip codes that drive insurance rates,” Hartwig told Bankrate. “It is the frequency and the cost of accidents within certain geographic areas that drive insurance rates.”

And though he went on to say that risk is not consistent across geographic zones, several consumer advocates are calling for change in the way insurance companies treat location in underwriting.

“In most states, with the exception of California, insurance companies charge drivers more for living in some zip codes than others,” said Carmen Balber, executive director of Consumer Watchdog. “We don’t think that’s the right policy.

“A zip code should not be the determining factor in a person’s auto insurance rates. What should matter is how good of a driver you are.”

Consumer rights organizations have been zeroing in on auto insurance rating practices of late, with criticism leveled against factors including income, education, marital status and shopping habits.

Though these practices are in general widespread, Bankrate notes that consumers can find some relief by shopping around and comparing prices either online or with an insurance agent.

“The more a consumer shops around, the more likely they are to find an insurance company who favors their particular characteristics and will give them a better deal,” said Balber.

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