ProPublica investigates racial disparities in car insurance premiums in Missouri, Illinois
Last week, ProPublica and Consumer Reports released a first-of-its-kind analysis of car insurance premiums and payouts in California, Illinois, Texas and Missouri. Following a nearly year and a half investigation into premiums in those states, ProPublica found that residents of minority neighborhoods, on the whole, had to pay more for their car insurance premiums compared with white areas with similar “riskiness.”
Larson’s team looked at neighborhood residents’ annual premiums for liability insurance and compared that to the average amount car insurance companies are expected to pay out in claims in a zip code. You can read the methodology behind the project here.
“The way car insurance is traditionally thought of is: if you live in a riskier neighborhood, you get higher prices,” said Jeff Larson, data editor at ProPublica. “But what we found, when we compared those neighborhoods, a white neighborhood and a minority neighborhood, we found more often than not that minority neighborhoods were getting charged sometimes twice as much or 30 percent higher compared to similarly risky white neighborhoods.”
Illinois is where ProPublica found the starkest disparities. Larson said that 33 out of 34 insurance companies they analyzed were charging more than 10 percent more for minority neighborhoods compared to similarly risk white neighborhoods. The 34th company was charging 9 percent higher.
In Missouri, 21 out of 25 companies were charging more in minority neighborhoods that weren’t justified by underlying risk, Larson said.
“These are national companies like Geico or Liberty Mutual, these aren’t just local car insurance companies,” Larson said. “They don’t seem to be pricing to underlying risk in the neighborhood.”
Missouri, Illinois, California and Texas were chosen for the investigation because they are the only states that collect the risk data for car insurance companies, Larson said, which is why the investigation was conducted in those states.
The car insurance industry was quick to respond, saying that the ProPublica report oversimplified the way companies set rates. James Lynch, the president of the Insurance Information Institute, said that insurance companies “do not discriminate on the basis of race.”
“They said in an op-ed published in the Insurance Journal that they have private data that showed it is fairly priced, to which we say: we looked at the best available public data and if you want to publish that private data and give it to us, we’ll happily rerun the numbers and see if the disparities exist,” Larson said. “To be clear, we’re not saying they’re putting in, ‘if this is an African-American neighborhood, charge them X dollars more,’ we’re merely pointing out this disparity. We never claimed that they were taking race into account, we just saw that there was this disparity between minority and white neighborhoods.”
If you’re interested to see your zip code’s car insurance premium vs. your neighborhood’s risk, you can find a ProPublica produced data set for that purpose here.
It should be noted that ProPublica along with the New York Daily News just won the Pulitzer Prize for public service journalism for an investigation on abuses in the New York City Police Department’s enforcement of the nuisance abatement law. Likewise, ProPublica’s series “Machine Bias,” of which this investigation into car insurance premiums is a part of, was also a finalist for explanatory reporting.
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