Legislators & Advocates Urge NJ Assembly to Act Quickly, End Racial and Economic Bias in Auto Insurance Rate Setting

Bill would stop insurers from using credit score, employment & education to set premiums

NEWARK, NJ – Members of the New Jersey Assembly, joined by auto insurance policyholders and state and national consumer and racial justice advocates, gathered today to urge Assembly passage of the Fair Auto Insurance Rates (FAIR) Act, A-1657, which would prohibit New Jersey auto insurance companies from using residents’ education, occupation, or credit score in determining premium levels.

The bill passed the New Jersey Senate on January 28^th and awaits a hearing in the Assembly Financial Institutions Committee.

“Auto insurance premiums should be based on a person’s driving record and history, and not on unfair and unsubstantiated assumptions that a person with less education and financial security is riskier to ensure,” said Assemblywoman Annette Quijano (D-20), the prime sponsor of the bill in the Assembly. “This is a discriminatory practice that we must bring to an end. We can no longer allow insurers to unfairly price gouge our state’s most economically vulnerable.”

“Education, credit scores and income have no bearing on driving ability or insurance risk,” said Assemblyman Gary Schaer (D-36). “Assembly Bill A-1657 mandates that insurance pricing be determined only by an individual’s liability and not unrelated socioeconomic factors. Through this bill, we will ensure that every driver has access to fair and affordable policies that keep New Jersey’s roads safe.”

While these factors do not overtly invoke race, pre-existing racial inequalities in educational, occupational and economic attainment ensure the same result: Black and Latinx drivers in New Jersey are more likely to pay more for, or be unable to afford, auto insurance coverage, hamstringing their economic mobility. The same is true for working class consumers of any background. A janitor with a perfect driving record is charged more for auto insurance than a doctor with a poor driving record.

“My car insurance is so expensive,” said Ashanti Howard, who is about to graduate Rutgers University with a 3.9 GPA. “I pay 22% of my income as a security guard for auto insurance, which is comparable to what I spend for about 2-3 months on food. I am responsible and need to drive legally to keep my job, or else face fines, financial risk, and legal trouble. When auto rates are based unfairly on credit scores, occupation, and education, it burdens me and other Black and Brown young people from being able to build financial security.”

Dena Mottola Jaborska, Associate Director at New Jersey Citizen Action added, “We cannot call a system fair when it penalizes people simply for being poor or coming from a less fortunate background. The rich get richer while the poor get poorer, perpetuating the cycle of economic insecurity and poverty for our most disadvantaged New Jersey families, disproportionately Black and Latinx families, and preventing them from securing a better future and rising to the middle class in our state.”

Data released in December of last year by the Consumer Federation of America, sourced from Quadrant Information Services, LLC, showed that drivers living in predominantly Black and Latino zip codes in New Jersey pay 139% of the statewide premium average of $1,459.69 for a 35-year-old driver with a clean driving record and other standardized characteristics. But drivers in predominantly White zip codes paid only 93% of the statewide premium average. Auto insures do not collect data by race therefore pulling data by zip code gives us a snapshot into the premium disparities between people of color in NJ and white drivers, and shows the effect of their usage of socioeconomic factors in premiums.

“I never imagined this was something that I even needed to know. As I have come to learn, I have paid thousands of dollars every year for two decades unnecessarily,” said Cuqui Rivera, Executive Secretary at Latino Action Network. “Just last year alone my annual renewal under Liberty Mutual would have been $2997 for the year. Switching to CURE for the year, which has clear policy against this unfair practice, is only $1,188 with virtually the same degree of coverage. I also know this means many of my own advocate colleagues as well as black & brown communities throughout New Jersey are still paying insurance premiums way beyond their means.”

“NJ is a state where many people need to drive to meet their basic needs. A car is not a luxury, but a necessity. Janitors, security officers, airport workers, and school food service workers rely on their cars to get to and from work. However, although they may be good drivers, they also may pay higher premiums because of their education level or job,” said Kevin Brown, Vice President and NJ State Director at SEIU 32BJ. “The more they pay for car insurance, the less money have they to support themselves and their families. I urge the NJ legislature to pass the NJ FAIR Act so that New Jerseyans are not discriminated against because of their education-level or job. It’s a matter of racial and economic justice.”

Wide disparities between Whites, Blacks and Latinos in educational attainment, professional and higher paid occupational attainment and credit scores are well documented, underlying the race and income-based disparities revealed in this data. For example:

• The percentage of white adults with a bachelor’s degree or higher is 29.3% compared to 17.7% for Black adults and 13% for Latino adults. (US Department of Labor)
• Black and Latinx families are more likely to have lower credit scores than white families. In 2017, an Urban Institute study found that predominantly nonwhite areas in 50 of 60 cities studied had median credit scores than were below 660. In comparison, predominantly white areas in only 4 of 60 cities studied had median credit scores that were below 660.

“In New Jersey, some 1.7 million residents work in occupations that have an annual median income of less than $40,000, including retail sales, janitors and home care workers,” commented Chuck Bell, Programs Director for Consumer Reports. “These workers are especially likely to be required to pay higher rates for auto insurance by some insurance companies, by virtue of not holding a managerial or professional job title — even though they may be excellent drivers with no accidents or traffic violations. For example, in Hoboken, Geico quoted a hypothetical cashier without a high school degree an annual premium that was $455 higher than an identical driver with an executive job title and advanced degree.”

Amy Torres, Executive Director at NJ Alliance for Immigrant Justice added, “NJAIJ is proud to stand by the FAIR Act, which would end the racist and classist effects of the auto insurance industry’s discriminatory rate setting policies,” said Amy Torres of the New Jersey Alliance for Immigrant Justice. “Without this legislation, New Jersey perpetuates a system of segregation, where the cost of mobility is higher simply based on socio-economic factors that have nothing to do with road safety. As more New Jerseyans find themselves out of a job, with mounting debt, or making difficult choices between work and school, we call on the State to pass the FAIR Act now.”

As a result of these socio-economic rating factors, a tremendous number of New Jersey residents pay extremely high auto insurance rates. A 2017 Study of the Affordability of Personal Automobile Insurance, conducted by the US Department of the Treasury, found that auto insurance is not affordable for a whopping 2.3 million New Jersey residents. There are 82 zip codes (shown on the attached map) where average auto insurance premium costs exceeded 2% of the Zip Code’s median income.

We stand behind the Fair Act, and see it is a prime opportunity to reduce racial inequity within this state,” said James Williams, Director of Racial Justice Policy at Fair Share Housing. “The racial wealth gap not only exist for wages earned but also for services paid for. We see this as an opportunity to more money into families’ pockets and into their homes.”

Carlos Medina, President at the Statewide Hispanic Chamber of Commerce of NJ (SHCCNJ) added, “SHCCNJ supports the FAIR act and applauds Senator Gill and Assemblywoman Quijano for protecting New Jersey’s residents.”

US Senator Cory Booker, Congresswoman Bonnie Watson Coleman, and Michigan Congresswoman Rashida Tlaib have introduced a similar bill, the PAID (Prohibiting Auto Insurance Discrimination) Act. The states of Massachusetts, New York, California and Michigan have already banned occupation and education as auto insurance premium-rating factors, and Massachusetts, California and Hawaii have banned the use of credit scores. Similar legislation is pending in states around the country.

###

New Jersey Citizen Action is a statewide advocacy and social service organization that advocates for social, racial and economic justice for all while also meeting the pressing needs of low and moderate income New Jerseyans through education and direct service.