Our friends at the Consumer Federation of America have issued yet another shocking new study. This one shows something that’s truly nefarious: that auto insurers use things like credit score, employment, and coverage history in determining rates. Furthermore, the CFA’s crack researchers also determined that consumers preferred that auto insurers not use these factors.

The survey that led the report was really a revelation to me and encouraged me to do my own research on the same topic.  My survey in the Washington, D.C. office of R Street revealed a similar trend: 100% of the people working in R Street’s offices preferred not to pay automobile insurance premiums at all and just have someone give them automobile insurance for free. Since when, however, has consumer preference been able to dictate any companies’ internal policies and pricing structures? There are lots of things we might prefer that companies do that they simply don’t, largely because they aren’t profitable.

In all seriousness, the best way to determine what factors get used to determine an auto insurance rate (or, indeed, the price for almost anything else) is the interplay of market forces. Auto insurers—like all insurers—use data about consumers’ background because it lets them better separate out those drivers likely to make expensive claims with those unlikely to do so. Driving history alone, although “fair,” provides a very limited data set: most traffic violations are never recorded (I’d be in the poorhouse myself if I got a ticket every time my odometer crept over the speed limit). Thus, other data like credit history and coverage history provides the best data because, unlike driving, it is consistently monitored. A bevy of research also shows that use of credit score and other data correlates with lower rates overall. In the end, CFA just doesn’t have a leg to stand on.

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