How Fair Is Your Car Insurance Rate?

What comes between you and a better car insurance rate? It may not have much to do with your driving record and everything to do with your ZIP code.

Sally Russell of Lutherville wants the best auto insurance coverage at an affordable price.

Russell: "I'm a pretty good driver, knock on wood."

But that doesn't necessarily mean she'll get a good rate. We had Russell go online to search for quotes. The first question she's asked is her ZIP code. After answering additional questions, she gets a quote.

Russell: "$470."

She tries it again using the same exact information but changes the ZIP code to a Baltimore City address.

Russell: "Quite a difference for the same coverage."

Her premium jumps from $470 to $780 -- an increase of more than 60 percent.

Russell: "I don't know what to think. I'm kind of blown away by it. I'm glad I live in Baltimore County."

But we discovered car insurance rates can vary dramatically from block to block.

We checked one insurance company and found if you live in Roland Park -- the 21210 ZIP code --the rate is cheaper than if you live just a few steps away in Hampden -- the 21211 ZIP code. The difference you'd pay is $57 more a year.

The difference can be a lot more depending on your insurance company.

Bob McCarthy moved just a few blocks.

McCarthy: "We carried our stuff. We didn't bother renting a truck. It wasn't very far."

His premium almost doubled. If anything, he thought the rate would drop because he moved from this apartment with on-street parking to a home with a driveway.

McCarthy: "They kept saying you moved into a high risk area."

According to the insurance information institute, that's because accidents, theft and fraud drive rates up and most claims come from urban areas.

Carolyn Gorman, Insurance Information Institute: "We think the territorial rating is the best you can get. Admittedly it's not perfect, but it's difficult to get anything better than that."

In one scenario outlined by the Maryland Insurance Administration, a 45-year-old, married woman living in Anne Arundel County ZIP code 21401 would pay $2,900 for a family rate. In Carroll County's 21157 ZIP code, she would pay about $3,300. In Baltimore County's 21030 ZIP code, her rate would be $3,600; and in Baltimore City's 21218 ZIP code, the rate would be $5,900.

Consumers Union attorney Mark Savage said the problem is a built-in bias that makes where you live more important than how you drive.

Savage: "This is unfair. It's irrational, it's unjust, and it's a matter of economic justice."

In fact, a study published by the Abell Foundation found territorial ratings discriminatory. Low-income families and minorities are impacted the most.

Researcher Tom Waldron: "Maryland's insurance system is broken in my opinion. It's out of date and hasn't been changed in many years."

It is the state insurance commission's job to make sure insurance rates aren't excessive or discriminatory.

Waldron: "I think Maryland needs to wake up and realize there's a problem."

The state is starting to look into the issue and has set up an auto insurance task force. Maryland state Sen. Lisa Gladden is on the panel. She's also a Baltimore City resident.

Gladden: "It is unfair especially when you live on one side of the street, you get one rate and on the other you get a different rate. No justification for that at all."

But changing the way insurance companies set rates won't be easy. It's been tried before and failed. A 1988 California law required the insurance industry to depend less on ZIP codes and more on other factors like driving records.




--------------------------------------------------------------------------------------------------------------------------------
Insurance Q&A Blog Homepage- http://insureqa.blogspot.com/

To have your questions or comments addressed send them to insureqa@hotmail.com