[Mpls] Automobile Insurance Reform

[Jim Bernstein]

I will rarely - very rarely - defend the insurance industry but basing
auto insurance premiums strictly on miles driven is ultimately
unworkable, unrealistic and will likely lead to even higher premiums.
Any viable insurance system must have a means for assessing and
predicting risk in order to correctly calculate premium.  While there is
a weak correlation of miles driven to accidents (yes, assuming all other
factors are similar if you drive 50,000 miles a year you are slightly
more likely to have an accident if you drive 500 miles a year but not
dramatically so) but it should not be the sole factor in rating.

Minneapolis residents pay higher premiums in auto insurance because the
industry is still able to use credit scores as a basis for rating.
While credit scores are not deliberately designed to discriminate by
race and income, they in fact are discriminatory.  Most auto insurers
use credit scores as a primary component of their auto insurance rating
formula.  Higher scores mean lower rates.  Lower scores mean higher
rates.

Because the credit score is weighted towards access and use of certain
kinds of credit more than others, minorities and lower income people who
tend to use credit less or to use credit differently or not at all are
more likely to be have lower credit scores. Minneapolis does have a
higher percentage of minorities living within its borders than most
suburbs.  It also has more people who are identified as low income than
most of the suburbs.  

What is grossly unfair is discrimination between zip code or census
tract in metropolitan areas.  There is no difference between a resident
of Minneapolis or a resident of Hopkins or a resident or Burnsville or a
resident of Maple Grove with regard to driving in an urban area. Many
Minneapolitans commute to work in the suburbs or visit them routinely
for retail or recreation just as many suburbanites got to Minneapolis
for work or retail or recreation. Yet some companies will tag a resident
of Minneapolis with additional premium because it is a "higher risk
driving environment" than a suburbanite - even though the suburbanite
uses mostly the same roads as a Minneapolis resident under the same
driving conditions with the same frequency!

Jim Bernstein
Fulton



-----Original Message-----
From: mpls-bounces at mnforum.org [mailto:mpls-bounces at mnforum.org] On
Behalf Of Steve Cross
Sent: Thursday, March 03, 2005 3:03 PM
To: Minneapolis Issues
Subject: [Mpls] Automobile Insurance Reform

If you want to read about REAL insurance reform, try this site:

http://www.centspermilenow.org/

It's actually an off-shoot of NOW -- coming from the insurance 
preference women get because they have less accidents.  The site's basic

premise is that all insurance rates should be based on how much you 
drive and not who you are or where you live.  (As, for example, by being

charged a higher rate because you live in a "bad" area of Minneapolis.)

Steve Cross
Prospect Park
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