Car Insurance is Racist as Black People Pay Higher Rates That Whites, Biden Says in His MLK Speech

US President Joe Biden believes that people living in minority neighbourhoods often pay more for car insurance than their white neighbours.

"If you live in one of those neighbourhoods and you have the same exact car I have in the other neighbourhood, you pay more for your insurance on that side. No basis for it, none at all, other than you are Black and I'm white," he said in a speech honouring Dr. Martin Luther King Jr. on Monday.

Structural Racism

According to the Consumer Federation of America (CFA), there is structural racism in auto insurance. This makes state-mandated auto coverage more expensive for African American drivers than white drivers. In its research, the CFA highlighted that pricing disparities are driven by the use of several socio-economic factors in premium setting that do not reflect personal driving history, but are proxies for race.

Doug Heller, CFA's insurance expert, said when insurers base premium on drivers' socio-economic status, they are disproportionately targeting African Americans with higher prices. "The companies will insist that they never ask for a customer's race, but if they are serious about confronting systemic racism, it is time they recognize that their pricing tools use proxies for race that make government-required auto insurance more expensive for Black Americans."

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Moreover, a 2015 report highlighted that ZIP codes with predominantly African American residents face premiums that are 60 percent higher than predominantly white ZIP codes. This reveals that African Americans indeed pay more for auto insurance than white drivers.

Prompts Uninsured Driving

Insurers argue that the factors are race neutral, but in fact, they harm African-Americans more than White Americans. As such the disparate pricing, leads to higher levels of uninsured driving among African Americans and higher incidence of state uninsured driving penalties, including fines, vehicle seizure and jail. And this also means reduced access to jobs, employment and car ownership.

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