We now know that good and responsible drivers in predominantly African-American and Latino communities are being punished and penalized based on where they live, rather than how they drive. We have the power to change that by giving consumers the option of using technologies such as telematics.
The whole point of Proposition 103 (passed in 1988) was to base auto insurance not on the whims of the insurance industry, but rather on a driver’s safety record, the number of miles they drive and years of driving experience.
But it hasn’t worked out that way and Californians, including those on the lower end of the socio-economic ladder, are burdened by the some of the highest car insurance rates in the country.
Predominantly African American communities are quoted premiums that are 70 percent higher than similarly situated drivers in predominantly white communities
That’s not to say there hasn’t been substantial benefit. Over the years consumers have saved significantly, but that hasn’t been the case across the board. This is especially true in low-income communities whose ZIP codes flag them as high-risk drivers, inflating their rates, and making already tight budgets impossible.
This is a real burden for people in minority communities. In 2017, the New York Times reported on a study that found “major insurers charged premiums that were on average 30 percent higher in minority ZIP codes than in comparable nonminority neighborhoods.”
The analysis, by ProPublica and Consumer Reports, “examined auto insurance premiums and payouts in California, Illinois, Texas, and Missouri,” and found that “even in highly regulated California, “many of the disparities in auto insurance prices between minority and white neighborhoods are wider than differences in risk can explain.”
The report went on to say “It isn’t completely clear why some major auto insurers persist in treating minority neighborhoods differently. It may in part be a vestige of longstanding practices dating back to an era when American businesses routinely discriminated against nonwhite customers.”
Reports from 2017 found that, on average, predominantly African American communities are quoted premiums that are 70 percent higher than similarly situated drivers in predominantly white communities ($1,060 vs. $622).
It is clear that there is still a patent unfairness in auto insurance, especially in communities of color. It is time for California’s regulations to get with the times and join other states in giving consumers of color the option of using the technology of today, including telematics.
Telematics is the 21st Century method for measuring individual driving know-how by observing actual driver performance, relayed electronically from hardware installed on a car or transmitted from a mobile app on a driver’s cell phone.
Communities of color have been the fastest adopters and biggest beneficiaries of mobile technology. Where there was once a digital divide in this country, minority communities have utilized mobile technology to bridge that gap.
By voluntarily downloading an app to their smartphone, a driver agrees to allow an insurer to measure data about (and only about) their driving habits. This includes behaviors like hard braking and distracted driving. Based on that data an insurance company can assess how much of a risk the driver poses and offer fair insurance, free of bias and inflation, that the driver may choose to purchase.
Prop. 103, unchanged, stands in the way of progress. No one is suggesting we gut the Proposition, but rather that we fix it so that pricing structures biased against minority and low-income communities no longer prevail.
Let’s end the inherent discrimination in auto insurance by adopting a more modern approach to measuring good driver behavior.
Editor’s Note: Edwin Lombard III is the Interim President and CEO of the California Black Chamber of Commerce