Car insurance rates have been steadily rising for decades, except for a sharp dip in 2020, when auto insurance companies offered refunds and credits in order to provide financial relief for customers dealing with pandemic-related income drops and to account for the deep reduction in driving.
Over the years, spiking medical costs and increasingly expensive car repairs have conspired to continually push up what we pay for car insurance. But for the most part, consumers think that auto insurance rates are fair or have no strong feelings about them. A new survey by YouGov for Forbes Advisor found that 48% of adult Americans think that car insurance rates are “fair” or “very fair.” Another 18% are on the fence, judging rates to be neither fair or unfair.
Of the 31% who judge car insurance rates to be “unfair” or “very unfair,” half (50%) nonetheless took no action in the last 12 months to seek a solution. About one-third say they at least got an insurance quote from a different company, and 11% switched companies. A notable portion (12%) say they reduced their overall auto insurance coverage in the last 12 months.
While almost half of Americans think car insurance rates are fair, a closer look under the hood reveals that “fairness” quickly drops when people are asked about specific pricing factors that are commonly used in setting car insurance rates.
Use of Credit? 69% Don’t Like It
For example, 69% of survey respondents didn’t think that a driver’s credit score should be used in auto insurance rates, yet many insurers put significant weight on credit-based insurance scores when setting prices.
Insurers say they can correlate poor credit with the chances that a person will make auto insurance claims. Although insurance rates are regulated by each state’s department of insurance, states generally allow pricing factors like credit when insurers can show a connection to higher claims. Only California, Hawaii, Massachusetts and Michigan ban the use of credit in auto insurance rates.
When Washington state’s insurance commissioner put a ban on the use of credit for insurance rates earlier this year he was immediately hit with pushback from the insurance industry and a lawsuit. But the ban on credit ultimately prevailed, taking effect June 20.
Because the use and extent of credit in rates can vary considerably among insurers, a driver with poor credit could especially benefit from shopping around.
Examples of Auto Insurance Rate Increases Based on Poor Credit
Education Level? 67% Say It’s a Fail
Many auto insurance companies give education-related discounts, rewarding drivers who have achieved a bachelor’s or master’s degree or Ph.D. But 67% of survey respondents don’t agree that education level should be a factor in car insurance rates.
Still, 21% supported the idea. Insurers might include education level in rates when they’ve drawn a connection between an advanced degree and lower claims.
Use of Occupation? Maybe
While using credit or education level in auto insurance pricing was contentious, the use of occupation wasn’t as controversial: 44% didn’t believe a driver’s occupation should affect rates, but 36% thought it was OK.
Like other pricing factors that aren’t about actual driving, some insurers give discounts for certain occupations. For example, lawyers, doctors and educators may be able to score lower rates.
Monitoring Actual Driving? People Are Divided
Usage-based auto insurance, which utilizes actual driving data in rates, could reduce reliance on non-driving price factors such as education. Using telematics, these insurance programs monitor and score actual driving such as speeding, braking and cornering.
About half (51%) of survey respondents said they’d be “very comfortable” or “somewhat comfortable” with having their driving closely monitored if it could lead to lower car insurance rates. A smaller portion (44%) had reluctance, expressing discomfort with such oversight.
So while auto insurance companies seek more precise ways to price individual “risk,” drivers may find fewer and fewer options that don’t use highly personalized measurements.
YouGov polled 2,000 U.S. adults. The survey was conducted on June 24, 2021. The survey was carried out through YouGov Direct. Data is weighted by age, gender, education level, political affiliation, and ethnicity. Results are nationally representative of adults in the United States. The margin of error is 3.0%.