Group: Geico Insurance Rates 'Very Unfair'

reuters ^ | 3/20/06

[mathprof]

A leading U.S. consumer group Monday accused Geico Corp. of using consumers' education backgrounds and occupations as criteria in setting auto insurance rates, resulting in discrimination against minorities and lower-income people.

The Consumer Federation of America (CFA) charged that the No. 4 U.S. auto insurer, has adopted rating methods and underwriting guidelines in 44 states that directly tie rates to education and occupation.

Geico, a unit of Berkshire Hathaway Inc. (BRK), the insurance and investment company controlled by billionaire Warren Buffett, rejected the charges. It called them "an offensive attempt to link fundamentally fair and actuarially sound industry practices with invidious discrimination."

The insurer provides auto insurance to more than 6 million policyholders, and insures more than 10 million vehicles.

Robert Hunter, the CFA's director of insurance and a former Texas insurance commissioner, called Geico's rate-setting policies an "underwriting sleight-of-hand" that can shortchange thousands of drivers.

Under Geico's guidelines, he said, a New Orleans factory worker without a high school education would pay $2,636 for insurance, 91 percent more the $1,382 that a white-collar worker with a graduate degree would pay for the same vehicle and location.

[Warren_Piece]

I'm a 41-year old, highly compensated, somewhat less-educated developer. (I guess I'm pretty good at what I do, they keep giving me more money ;) ). I haven't had an accident or ticket. Ever. In 25 years of driving. I drive one of these:

Will barely get up to 70, but ain't she cool? In an ugly, bulldog, kind of way...

Anyway, I digress. My point is, I'd love to see the actuarial tables on me. Living in TN doesn't help my rates, though. We can sure build cars here, but we ain't very good at driving them!

[AustinBill]

Don't know about Geico, but when I applied to Liberty Mutual I had to get my university registrar to send them proof of my undergraduate degree. Liberty's rates are even better than Geico (that Gecko doesn't work for free :) but they're very picky about who they insure.

[Indy Pendance]

That's an ugly car, you must be proud! Here's mine... (without the white letters)

[Graybeard58]

Stupid people should be charged more for everything.

We are I mean they are.

[HKMk23]

Hey, you can continue to feel really cool about your ride. Out here in CA, those things are 'da bomb'. Folks are getting them "slammed" (we used to say "dropped") and "pimped out" (read "loaded") with large diameter dynamic wheels ("spinners" to use the vernacular), shod with low-profile tires, wild custom paint and graphics, tinted glass, and audio/video systems that shame the local movie theaters.

So, bro, be cool; you hip widdout even tryin. Word.

[isthisnickcool]

This company is non-profit? I didn't know that.

Yes, CFA is a 501(c)(3). Just like a religious organization. Let me be clear. CFA which is part of the topic of this thread is not Consumers Union who publishes Consumers Report. Consumers Federation of America(CFA) only took in about $3.1 million in 2004. It's tiny. I mentioned Consumers Report to show how massive some of these nonprofits are.

Ever heard of The Carter Center? Jimmah Carters toy? It took in $150 million last year and has $300+ million in assets. This is a charity and should not pay taxes?

The American taxpayer has been ripped off long enough by these nonprofits that are living under the same law real charities operate under.

*Financial information found at guidestar.org

[Indy Pendance]

I wonder how much it costs to insure a lowrider?

[Indy Pendance]

Our gov is so massive, it's hard to know what's what. Pity. Thanks for the info.

[timm22]

As I read my own post, I think about health insurance. Is the day coming when what we pay is determined by "predictive models" of our health risk? Will morbidly obese smokers be required to pay more? Will thin marathon runners pay the minimum rates?

Just questions I'm throwing out there.

I suspect that what will happen is that predictive models will rule when they subsidize politically acceptable groups, and punish politically unacceptable groups. Thus, assuming current political trends continue, smokers get nailed on rates, whereas promiscous homosexuals (who we will say face much greater health risks) will not.

What I would LIKE to happen is allowing insurers to set whatever rates they want, for whatever reasons they want. As private institutions, they should have that right. If you don't like their rates, go to someone more agreeable, or start your own company. No one should be able to use force to arrange favorable contractual terms against the other party's wishes.

I'm not saying that out of self interest. Under our current state-regulated system, I still end up getting punished for belonging to certain groups. In the free-for-all I advocate, I'd probably end up paying even more.

[guestfox01]

You know what... If I ever have to see one more of those stupid Geico commercials with the gecko, I'd like to see someone build a fire and stick that gecko on a spit and roast the little bugger.

[George from New England]

I think this "education makes you a safer driver" is bs.

I never attended a year of college...

I'm 50 and I've never had an accident that was my fault.

So there!

[HangnJudge]

The government's answer to this angle is to *force* insurance companies to provide coverage (at reduced rates) to those who wouldn't get written in the first place.

The introduction of regulation into an efficient capitalist system will inevitably raise the total cost of operation to the consumer. This however assumes that the market is "efficient" and as such the consumer has free access to all needed information as to the overall cost / worth of the product. If trade secrets are being employed, then their presence should be made known, but not regulated. The consumer can, in an efficient market, then decide on it's own how to correct for information purposely held not in evidence; adjusting as it sees fit to deal with trade secret practices. Competitors, not employing secrets, can advertise this fact as a value-added feature to their product.

[Warren_Piece]

Interestingly, we have a leapord-spotted gecko that likes to sit on my wife's shoulder and watch TV. She hasn't indicated whether she likes the Geico commercials.

[csmusaret]

The annual premium is not the only yardstick to measure an insurance company by. Paying claims, not raising your premium after a claim, and prompt fair service are all worth consideration. That is why I have Stuck with State Farm for over 30 years and why they have stuck with me.

[Warren_Piece]

It's all about the odds. When you filled out your NCAA brackets, if you were smart, you predicted a few good-guess upsets. The odds are just too great that will happen every year. Same with actuarial tables. You and I are the exceptions that prove the rule.

[Indy Pendance]

After 30 years, if you were to file a claim, would they drop you like a hot potato? Just curious, we were with American Family for 15 years, some jerk ran a red light into us, unsured, we filed a claim, and they raised our rates (clean record). After a scathing letter, they said, sorry, we erred. Too late, we found another insurance carrier. That was 20 years ago. We more than paid for the cost of repairs over time.

[inkling]

When I first signed on with GEICO (I was in my early 20s), their rates were incredible. But over the years, they kept raising the rates a little more each time I re-upped. When I challenged them, they assured me it was just because the Zip Code I lived in had a lot of accidents.

Finally, 10 years in I decided to check with a few other companies. That was when I found out that GEICO was completely ripping me off. They undercharged me to hook me in, then raised the rates exponentially over the years.

Being young, dumb and single I didn't notice it, but I'll never recommend them to anyone.

[csmusaret]

No. I have had several claims over the years and they have never raised my rates as a result. I am very satisfied with State Farm and I have never had any difficulty filing a claim.

[Wheee The People]

"The bitter taste of poor quality remains long after the sweetness of low price is forgotten."

I've found my Farmers agent to be the low price leader too. To make sure, I take a new bid every 3-4 years. Great service and great price. You need to shop around to find it, but it's out there.

[MediaAnalyst]

Most likely - yes, you could get away with it. But, God forbid, you file a major claim, you can bet that Gieco's investigators will be tracking down every step you took since you were conceived in your mother's womb (something the MSM doesn't seem to mind the government doing with GPS and RFID, I might add).

With that being the case, you might as well use one of the fly-by-night operations you see taped to lamposts. They get you a card good enough to keep your registration legal, but probably not good enough to pay-out when really necessary.

Having said that, using a fly-by-night operation could make sense when your bill for minimal (legitimate) coverage is, say, $6,000 per year because you have a teen driver in the house. After all, there is some point where insurance is so expensive, it's better to play the odds, rather than go broke paying for insurance (just be sure that your teen is a responsible driver if you do that).