Geico Sued for Charging Blacks More for Auto Insurance

Rueter’s News reports that GEICO’s friendly little gecko is going to need to hire a lawyer:

Three former policyholders of auto insurer Geico Corp. filed a federal lawsuit on Monday accusing the company of discriminating against blacks by using education and employment status as factors in setting auto insurance rates.

It said that because black policyholders are “significantly less likely” than whites to hold jobs requiring advanced education, Geico knew that using occupation and education levels to set insurance rates would result in blacks being charged more than whites with similar driving records.

The lawsuit, which seeks class-action status, accuses Geico of intentional discrimination against blacks, and concealing its practices from policyholders and insurance regulators.

All insurance companies are allowed to ‘discriminate’ on certain characteristics - usually age, sex, driving record, type of vehicle. The reason for this is because people of different ages, i.e. the very young and the very old, cause more accidents per capita than the average driver. Men cause more accidents than women (only because they drive twice as much is my theory), and people that drive sports cars are more likely to cause an accident than a soccer mom in a mini van.

Some companies have started to ‘discriminate’ based on credit scores. Statistically people who have better credit have fewer accidents. The explanation I have heard is that if you are not paying attention to your bills you probably are not paying attention to your driving either.

So, the first question is - should insurance companies discriminate at all? Or should they charge everyone one rate? Should a 20 year old guy who has a DUI and 6 speeding tickets and drives a corvette get charged the same as a soccer mom with an astro van who has never even been pulled over?

If insurance companies are able to figure out who has the least chance of having an accident and are allowed to give them the best price (aka discriminate) then what factors should be allowed?

And what if it could be proved that a single race attributed to 50% of all accidents? Would it be right for every other driver to have to pick up their share? Would it be discrimination if it is ‘charging the right premium’ for the risk - which is what insurance is supposed to do?

The problem with this law suit is that GEICO does not discriminate based on race - but on factors that supposedly affect blacks more than whites. For this reason I don’t think GEICO will lose this case.