Coalition renews call for law banning discriminatory auto insurance pricing as millions of NJ drivers face rate hikes in 2023

January 12, 2023

Trenton—A coalition of consumer, business, anti-poverty, racial justice, and immigration advocates today called on state lawmakers to advance legislation banning discriminatory auto insurance pricing practices, as millions of New Jersey drivers face an average premium increase of $125 in 2023. 

A new law that took effect January 1 requires drivers to maintain higher minimum liability coverage for their auto insurance policies. Meanwhile, the Fairness in Auto Insurance Rate (FAIR) Act (S 357/A1674), which would ban factors such as credit history, education and occupation in pricing auto insurance, has yet to advance in the New Jersey Legislature this session. These factors act as proxies for race and socio-economic status, inflating auto insurance costs for drivers of color and low-income drivers. These same drivers will be hardest hit by the new insurance requirements.  

“New Jersey drivers who are already being charged unfairly high rates should not be required to pay more for basic liability coverage without addressing this discriminatory insurance industry practice,” said Maura Collinsgru, Director of Policy and Advocacy for New Jersey Citizen Action. “Passing the FAIR Act will help lower costs for consumers, reduce discrimination, and help ensure everyone in New Jersey can afford the coverage they need.” 

“New Jersey leads the nation with some of the starkest racial and economic disparities,” said Racquel Romans-Henry, Policy Director for Salvation and Social Justice. “The fight for fairer auto insurance practices reminds us that there isn’t a sector in our society that has not been informed by structural racism. Elected officials cannot claim to be champions of equity and justice without acknowledging and remedying the discriminatory and predatory auto insurance practices that continues to contribute to the economic strain and hardships experienced by so many Black and low-income communities.” 

Auto insurance pricing disparities in New Jersey are stark, with low-income and Black and brown drivers generally paying the highest prices. In New Jersey and many other states, insurers can use non-driving factors such as a person’s credit history, level of education, and occupation to determine how much they’ll pay for coverage. This results in drivers of color and low-income drivers being charged higher rates than wealthier drivers, even when they have better driving records than those wealthier drivers.  

“Pricing auto insurance based on these non-driving factors penalizes people for facing economic disadvantages, like having a lower credit score or a less lucrative paying job,” said Chuck Bell, Advocacy Director at Consumer Reports. “A 2021 CR investigation found that  many insurers charge higher premiums to people with less education and lower-paying job titles, even if they are excellent drivers. That’s unjust and should be banned in New Jersey.” Consumer Reports found that in Hoboken, NJ, for example, Geico quoted a hypothetical cashier without a high school degree an annual premium that was $455 higher than an identical driver who was a vice president of a supermarket chain with an MBA. 

Even without the minimum liability price increase, an estimated 2.3 million New Jerseyans (or one in four residents) living in low-and-moderate-income ZIP codes and communities of color are struggling to pay for auto coverage. In 2021, Consumer Federation of America (CFA) analysis of insurance industry data found that for drivers with a perfect record, a poor credit score would add an average of $1,311 (or 156%) to annual premium costs compared to those with excellent credit. Additionally, CFA found that drivers with a clean driving record in majority Black and Latino ZIP codes in NJ pay an average of nearly $700 more per year for insurance than drivers in majority white ZIP codes. 

The organizations supporting the Fairness in Auto Insurance Rate coalition include: 

New Jersey Citizen Action Anti-Poverty Network BlueWave New Jersey Consumer Federation of America Center for Economic Justice Consumer Action Consumer Reports Consumer Watchdog Hispanic Statewide Chamber of Commerce Indivisible Cranbury Integrated Justice Alliance Ironbound Community Corporation Latin American Legal Defense and Education Fund Latino Action Network Latino Action Network Foundation Laundry Workers Center Lutherans Engaging in Advocacy Ministry Make the Road New Jersey National Association of Social Workers – New Jersey Chapter National Consumer Law Center National Domestic Workers Alliance National Organization for Women of New Jersey New Jersey Alliance for Immigrant Justice New Jersey Appleseed New Jersey Institute for Social Justice New Jersey Policy Perspective New Jersey Prison Justice Watch New Jersey Working Families New Jersey Tenants Organization Returning Citizens Support Group Salvation and Social Justice SEIU 32BJ Stand Central New Jersey The African American Chamber of Commerce of New Jersey Urban League of Essex County Urban League of Union County