High Auto Insurance Rates? Lack of a College Degree to Blame?

A recent press release from Consumer Watchdog indicates that many of California’s insurers are in direct violation of Proposition 103, which established that car insurance rates would be based primarily on three factors:

• The safety record of the driver in question
• The number of miles that he or she drives each year
• The policy-holder’s years of driving experience

According to Proposition 103, insurers cannot consider any other factors in setting auto insurance rates in California without submitting them to California’s Commissioner of Insurance for approval — and in order to win approval, the factors have to be “substantially related to the risk of loss”.

It is obvious insurers weren’t happy about Proposition 103, but they’ve found a loophole by increasing across-the-board rates, then offering discounts to certain “groups” like those who work in “preferred” fields or those with special college degrees.

But have you ever wondered why auto insurance providers use your education and occupation to determine your rates? There are both simple and less obvious reasons for them doing so.
Some occupations are proven to attract high risk drivers while others attract prudent drivers. For example, scientists pay some of the lowest auto insurance rates. Why, you wonder? A scientist does his or her significant research at a company that pays them to be meticulous and find valuable information. These people often take those careful practices from work and use them on the road. Scientists are considered to be careful individuals that think things through and always pay full attention at what they are doing.

Teachers, engineers, and pilots are also in the most-preferred tier. These occupations do not attract the risk-taking, boasting behavior of stock brokers, restaurateurs, and the like. Insurance companies assume that the analytic mindset of scientists, engineers, teachers, pilots, and similar professionals is reflected in their driving habits.

Any other reasons why doctors pay less for auto insurance coverage than manual laborers? Yes, drivers with “preferred” occupations file fewer claims than drivers with “high-risk” occupations. The term “risk” here translates more accurately as “risk of filing an insurance claim” instead of “risk of getting into a car accident.” For example, a doctor with a $200,000 salary involved in a minor fender-bender is much more likely to pay for damages out of pocket than a laborer making $12 an hour. In other words, people with high-paying jobs file fewer auto insurance claims.