Should You Pay More For Car Insurance Because Of Where You Work? One Company Thinks So

When you buy auto insurance, the amount you pay is usually based on your age and driving record. 

So why did a consumer group in New Jersey recently find that Geico is basing auto insurance premiums upon the job and education level of its customers?

It’s true: Depending on which company they choose, blue-collar workers are paying more for insurance than white-collar workers who went to college.

In some cases, blue collar workers are paying over $1,000 more for the same policies.

Paying More Than Your Neighbors?

The Consumer Federation of America (CFA) discovered a Geico handbook that details how the company figures premiums for its customers. The handbook describes grouping people according to their jobs and education. People higher on the scale get better rates on their auto insurance. People further down pay more.

The jobs that Geico favors? Accountants, architects, engineers, pharmacists, and lawyers.

The difference in rates varies from state to state. Hardest hit are working people in Louisiana. Compare these two yearly premiums, for the same policy on the same car:

• A white-collar worker with a degree in law would pay $1,079.70
• A custodian with a high school diploma would pay $2,426.30

That’s a difference of $1,346.60. A year.

Insurance companies are allowed to consider a variety of factors when deciding how much a person should pay for premiums. However, there are laws that prevent companies from using income and race as factors.

The CFA Director of Insurance, J. Robert Hunter, says Geico is "pulling an underwriting sleight-of-hand” to get around those laws.

New Jersey Assemblyman Neil Cohen has submitted a bill to the New Jersey legislature that would ban using job and education status to determine premiums. A similar bill has been submitted to the New Jersey Senate. And the CFA has called for a nationwide ban.

Justified Risk?

For its part, Geico says it “uses a combination of several dozen factors.” Geico added that the “use of education and occupation to underwrite and price is a long-standing industry practice."

Geico isn’t alone. Other insurance companies use similar methods. Allstate and Liberty Mutual take their customers’ educations into account for pricing. But rather than simply quote higher prices to blue-collar workers, Allstate and Liberty Mutual give discounts to college graduates.

Insurance companies claim that education and employment are good indicators of risk. Geico states that the decision to use job and education status as factors was based on “many decades” of experience. Geico also says that by charging riskier groups more for premiums, they can keep the overall cost of their insurance lower. 

Assemblyman Neil Cohen says it’s “discriminatory.” The CFA says Geico’s methods cause an “unjustifiable increase in insurance rates for many lower income and minority consumers.”

What Can You Do?

Geico uses these methods in 43 states and Washington, D.C. If you live in Alaska, Indiana, Kansas, New York, Tennessee, or Virginia, you don’t have to worry about it. If you live in Massachusetts, Geico auto insurance isn’t even available.

Job and education aren’t the only factors that Geico considers. So even if you aren’t a college professor or a corporate lawyer, you may still get a good price on auto insurance from Geico.

If you’re worried that working as grocery clerk or postman will prevent you from getting a good rate on car insurance, use a company that doesn’t take that into account, like State Farm and Progressive.