According to the Consumer Federation of America(CFA), a national consumer's rights advocates group, low to moderate income drivers are being priced out of the auto insurance market. The organization released the results of their latest survey and found that high auto insurance premiums present an insurmountable obstacle to car ownership for Americans with a lower income. Approximately one-fourth to one-third of low to moderate income drivers do not have auto insurance.
The CFA says risk factors do not always relate to driving, and believes the risk factors should have more relevance. This practice is known as price optimization. Insurance companies measure risk using unrelated factors that include:
J. Robert Hunter, CFA's Director of Insurance and a former Insurance Commissioner for Texas has said that state governments, which require drivers to purchase auto insurance, have a responsibility to ensure that car insurance stays affordable to lower income Americans. In addition, Hunter said that state should ban insurance providers from raising the rates of consumers who do not shop for better deals. The federation said that setting rates based on a customer's willingness to seek lower premiums is questionable activity.
Allstate Accused of Overpricing?
CFA has accused the insurance giant Allstate of illegally raising rates for customers who do not to shop around in several states. In addition, Allstate uses price optimization, such as how long a policyholder spent with their previous insurance provider, which leads to unfair increases in premiums.
The CFA is asking all state commissioners to hold a public hearing on banning price optimization practices. Hunter says the Consumer Federation of America believes that more than half the nation's largest insurance providers use price optimization to raise the rates on policyholders who do not shop around for insurance.
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