Report: Insurance Premiums Climb for Not-At-Fault Accidents

CARS.COM — New research by a consumer advocacy group claims that if you’re in an accident that’s not your fault, some car insurance companies could still raise your premiums. An insurance industry group, meanwhile, defends the practice.

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The Consumer Federation of America, based in Washington, D.C., audited five major U.S. insurers — Allstate, Farmers, Geico, Progressive and State Farm — submitting online applications for identical driver profiles save one detail: a so-called “not-at-fault” accident in one application versus no such incident in the other. CFA conducted the research in 10 cities.

The result? In Minneapolis and Baltimore, annual quotes for applicants with not-at-fault accidents averaged more than $200 higher than annual quotes for incident-free applicants, CFA found. In Queens, N.Y., the difference was $401.

Oklahoma City and Los Angeles had no difference in premiums because consumer protection laws in Oklahoma and California prohibit rate hikes due to not-at-fault accidents, said Doug Heller, who helped conduct the research for CFA. Other states may do this, too, Heller added, but CFA did not investigate all states for such laws.

The organization found one insurer — State Farm — didn’t raise premiums for applicants with not-at-fault accidents. Progressive, by contrast, had the highest increase, averaging 16.6 percent higher premiums in cities outside California and Oklahoma for applications with a not-at-fault accident. Next highest was Geico (14.1 percent higher for applications with not-at-fault accidents), followed by Farmers (11.1 percent higher) and Allstate (4.8 percent higher).

Such outcomes might tempt you to leave a not-at-fault accident off your application, but Heller recommends against it: “I would never advise anybody to do that because an insurance company can void your policy if they find that,” he said. Still, he thinks such policies could prompt customers to keep minor accidents to themselves.

“It’s a way to say, ‘OK, we don’t want any fender benders [to be reported],” Heller said. “If you get a fender bender and you can get that person just to pay you or split it with you … there’s a bit of that [pressure] going on.”

The difference wasn’t just among cities and insurance companies. CFA submitted applications with jobs, property ownership and education that suggested upper-income drivers alongside applications that suggested lower-income drivers. Throw in a not-at-fault accident, and premiums increased 6.6 percent for the upper-income group, CFA said. For the lower-income group, a not-at-fault accident raised rates 9.6 percent.

The overall results are blended between the two groups, Heller said.

Cars.com reached out to Allstate, Farmers, Geico and Progressive. Three of the companies did not respond, but Farmers referred us to the Insurance Information Institute, a New York-based think tank backed by the insurance industry.

“Insurance premiums are based on the insurance companies’ best estimate of what expected claims under the policy are going to be,” said Steven Weisbart, a senior vice president and chief economist at the institute. “Just because you personally have had a not-at-fault accident, that doesn’t mean that you personally are going to have an at-fault accident in the future. What it does mean is that you are now in a group of people who have a higher likelihood of having an at-fault accident.”

But CFA decried the findings, calling for lawmakers to adopt additional consumer protections against them.

“Penalizing safe drivers hit by another car is not only very unfair; it also discourages them from filing legitimate claims,” said J. Robert Hunter, CFA’s director of insurance, in a statement Tuesday. “Lawmakers and regulators need to protect consumers from being punished when they’ve done nothing more than use the policy they have already paid for.”

But Weisbart said all kinds of data group consumers into different risk groups even as some of it might seem unrelated to their likelihood of being in a crash. Regulators have barred access to some of that data, such as race and income, but most states in the CFA study evidently allow insurers to factor in not-at-fault accidents.

“The fact is that of the 10 cities they looked at, eight of the insurance departments said, ‘This is OK,’ so there is statistical validity,” Weisbart told Cars.com.

CFA “thinks the only thing we should use to price auto insurance is driving behavior,” he continued. “That would be fine if all we knew about driving behavior highly accurately classified people’s chances of submitting a claim.”

But driving behavior alone only gives “very, very rough groupings” of risk, Weisbart said.