Geico is a Snob?

GEICO was accused Monday of tying education and occupation to auto insurance rates, a policy that may discriminate against minorities and lower-income workers.

In a March 14 letter to the National Association of Insurance Commissioners, the Consumer Federation of America (CFA) said “Geico’s methodology is reprehensible because not everyone has the opportunity or can afford to pursue a four-year college degree.”

Geico, responding in a March 17 letter to the NAIC, said the CFA’s opinions are “an offensive attempt to link fundamentally fair and actuarially sound industry practices with invidious discrimination.”

Read More: CFA Press Release.

GEICO is probably not tying the metrics because they’re big meanie-pants, but rather, as there’s a statistical relationship… But what do you think?

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(Tip o’ the hat to Thomas!)

Comments

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  1. drsmith says:

    I will try to make this short. In addition to education, Geico uses all of the standard information to determine if you are a risky driver – you know, like if you’ve gotten a ticket in the last 5 years and if there are points on your license. Education level is only a small part of the overall data.

    Personally, when my auto insurance quote from Geico is almost half that of the nearest competitor, the choice is easy…and I only have a 4 year degree. No graduate school or anything like that. IMHO, getting a 4 yr degree isn’t difficult. You just have to find funding(grants) and a college cheap enough so you don’t end up declaring bankruptcy. 4 years of bad pay and crappy classes should equal a discount on something in the long run.

  2. DeeJayQueue says:

    It would stand to reason that someone who went to school, or has the skills or ability to get a good job, regardless of how they got there or did that, would be a smarter, better driver and should pay less for insurance because of it. It sucks that some people don’t have the opportunity to go to college or get a great job but instead of bitching about your car insurance rates, why not try to get a better job or get into school?

  3. Hawkins says:

    Actuaries (the grim mathematicians who calculate risk for insurance companies) are extremely cautious about making assertions like this. If they say that educational achievement is a valid predictor of risk for auto accidents, then they’re saying so because they have ass-loads of data to back it up.

    And how is policy any more or less discriminatory than setting rates by zip code (which they do)? Not all of us can afford to live in Rancho Del Boca Vista, but so what? If you live in a rough neighborhood, you’re likely to have more claims.

  4. bonnie says:

    I’m viewing this in the context that prices are affected by age and gender, as well. Those are characteristics people have even less control over. I’m left supporting Geico’s right to use statistically significant indicators like occupation and education, even though it grates on my PC sensibilities at first blush.

  5. GenXCub says:

    I agree that metrics like that should be used on their part to determine your initial rate. I use Geico, and as you stay with them, they lower your rate. I think that after the inital premiums are taken, each renewal price will reflect your claim history and driving record, so that after X amount of time, everyone equals out regardless of education, et al…

  6. RandomHookup says:

    Let’s not forget to bash USAA for only allowing officers and senior enlisted folks to join (at least the ‘good’ pool).

  7. Karmakin says:

    Geico shouldn’t even be in business. As auto insurance is mandated by law, it should be done by government, or government regulated non-profit co-ops.

  8. GenXCub says:

    If auto insurance were done by the government, it would lose so much money by being required to insure every person equally across the board, as soon as they’re eligible to drive.

  9. non-meat-stick says:

    How long before monthly income or marital staus is taken into account. Only one factor should determine your rate: your driving record. New drivers get thrown into a “industry standard rate” while existing drivers should be assessed by their record.

    I know plenty of people with “real” jobs and “college educations” that cannot drive worth a fucking shit. I have never gotten a ticket or been in an accident and have been paying discriminatory rates on my car insurance for the last 9 years, because I am a male.

    The fact that if my car is parked in my garage in my home, and some wack-o with a .28 blood-alcohol level comes flying down the street and crashes into my car in my garage, I am partially liable/responsible for that accident happening makes the auto insurance industry flawed from the begining. Greedy bastards….

  10. adamondi says:

    So, what happens when someone doesn’t have a long enough driving record, non-meat-stick? Are we supposed to expect to get screwed for not having 20 years of driving record under our belts?

    Besides, if you want to be judged solely based on your driving record, find an insurance company that uses that as their primary metric. I use Pemco Insurance here in Washington state because that is exactly what they do. Safe driving records get HUGE discounts from them.

    That is why it is so important to shop around for insurance. Every company uses its own unique formula to determine rates. One company may screw you, but a different one may be specificly marketing to you.

  11. mrscolex says:

    *shock*

    I agree with non-meat-stick 100%.

    You guys are missing the point in your blind defense of the gecko– Why should you be penalized based on statistics that aren’t necessarily true to you?

    I’m sure the entire country would be up in arms if the criteria were a bit more dicy. For instance, what if it was race? How is discriminating you on your car insurance based on your job/income (assuming this is based on statistical criteria that indicates that people with a stable job/income drive safer). What if those same statistics could prove that mexicans are more prone to car accidents would it be OK for Geico to charge mexicans more? Or white people? Or black people? Of course not– because we all know its discriminatory.

  12. KarlHungus says:

    Is it just me, or is the funniest part of all this the fact that they misspelled “occupation” when asking the poll question about the connection between education and occupation?

    It’s probably just me.

  13. OkiMike says:

    Then again, I know not a few people who have graduate degrees, think of themselves as The Shit and drive accordingly.

    May their insurance rates be like a hippie in the king’s private marijuana garden!

  14. factotum says:

    Show me a university that offers driver education as a required course for their degree offerings and I might be persuaded. How does having a degree in English or chemical engineering make someone a better driver? These companies are simply trying to extract more money from their customers through creative metrics rationalization. You know, that animated lizard probably costs a lot to render and the farking commercial is on every channel at all hours; that costs beaucoup bucks!

    I stay with Wawanesa. Ranked #1 by the CA Dept of Insurance, their policies are 12-month terms. At 28, w/ full coverage, I pay $600 a year. F-U Geico!

  15. jpowers says:

    This is absurd. Why the hell should Geico give a wet fart about what is and what is not fair? They have an obligation to their shareholders to care about one thing: price per share. If they believe, for whatever reason, that educated drivers or drivers from certain occupations are less risky, then they should have every right, as a for profit company, to offer those customers better rates. If they are wrong, or if this is “unfair,” the market should, and will, be the one to punish them, not some regulatory agency.

  16. drsmith says:

    non-meat-stick, I don’t know if the garage incident actually happened to you or not, but from what you said, you would not be liable at all. If your insurance company did try and say you were liable, you should have done whatever possible to clear up the confusion – including taking the insurance company to court if it came to that. What’s not clear is if this particular incident had anything to do with Geico, and I suspect you’re just kvetching towards the entire auto insurance industry, in general.

    That said, most single males drive like shit and they should have to pay higher rates. It’s just a fact.

    Disclaimer: I’m a single male driver. The difference between me and most other drivers is my driving record is completely clean without even so much as a parking ticket.

  17. tby says:

    I always thought that my Geico quotes were 50% to 100% higher than the competition because they don’t like single males with mediocre credit in bad zip codes. Claiming to be an Executive with a Masters degree dropped a whopping $10 off my quote from last November…

    I guess I was right. In Florida, at least.

  18. AcidReign says:

    …..In my experience, being married does lower a male’s cost. My premiums went down a lot when I declared this to my State Farm agent. We had a “parked car” claim a while back, when someone backed into my wife’s car, and the premium did not go up. (In fact, we got a rebate check at the end of the year due to State Farm’s costs being lower than expected!)

    …..I really don’t have a problem with statistical analysis being used to compute premiums. Of course, I would get socked a bit, being blue-collar and male! (Not to mention ye olde “Beer” degree at Auburn!) Short of installing a monitoring device in every policy-holder’s vehicle, it’s pretty much the best they can do. What is potentially alarming is when the insurance company collects this huge database on every detail of your life, then sells or leaks it, or gets hacked.