You’ve heard of the gender wage gap, but how about a car insurance premium gender gap?
It turns out, Michigan’s is a doozy.
Women in Michigan paid an average of $79 more per year than male drivers for the same car insurance coverage in 2018 — the second-biggest gender gap in auto insurance costs nationally.
That is just one finding in a new report by The Zebra, an online auto insurance comparison pricing company that analyzed gender differences in rates in Michigan and around the country.
Most states allow insurance companies to offer different premium rates to male and female drivers if they are able to show, for example, that male teen drivers are statistically more likely to get into crashes and file claims than female teens.
“Insurance is all about risk,” said Alyssa Connolly, director of market insights at The Zebra. She also is licensed in property and casualty insurance. “Insurance companies want to use as much data as they possibly can to understand consumers.
“For decades, gender has been legal to use as a rating factor in almost every state because it tells the insurance companies something about how risky a man is to file a claim or how likely it is for a woman to file a claim. … It’s all about claims, and that’s where the big question mark is.”
Men are riskier, but women pay more
Though they have lower premiums than women in Michigan, research from the Insurance Institute for Highway Safety shows men are riskier drivers.
Men are more likely than women to drive under the influence of alcohol, drive without wearing a seat belt and speed, according to the IIHS. Male drivers also are more likely to get into more severe crashes than female drivers. Yet female drivers are more likely to die or be injured in crashes of equal severity.
“What it really comes down to in the eyes of an insurance company is how likely are they to file a claim and how expensive is that claim?” Connolly said. “One theory is that men are not filing as many claims as women or the claims are not as expensive. That could be contributing to the shift of men paying more to women paying more.”
The report also showed that nationally, women’s average annual car insurance premiums were about $10 higher than men’s in 2018. Women paid more than men for car insurance in 25 states, while men paid more than women for car insurance in 21 states.
Only Nevada had a larger price discrepancy than Michigan. There, women paid $121 more in 2018 than men for the same type of auto insurance.
Six states ban the use of gender in car insurance pricing: California, Hawaii, Massachusetts, Pennsylvania, North Carolina and Montana, according to The Zebra.
In Michigan, the state Insurance Code prohibits the use of gender as a rating factor for non-group auto insurance policies, said Andrea Miller, a spokeswoman for the state Department of Insurance and Financial Services.
However, the state does allow gender to be used as a rating factor for group auto insurance policies, Miller said. Group insurance might be issued to employee groups as well as to members of other groups or associations, such as retirement or professional associations.
“Auto insurance policies are sold on either a group or a non-group basis,” Miller said. “These are governed by two different chapters of the Insurance Code. The use of gender as a rating factor is prohibited under the chapter governing non-group auto insurance policies. However, there is no such prohibition in the chapter governing group auto insurance policies.
“Auto insurers are required to demonstrate that the rate charged is reasonably related to the risk being assumed by the insurer for all rating factors, whether in a group or non-group policy, but the use of gender is specifically prohibited from use in non-group policies.”
Miller said the state doesn’t track how many policies are sold through groups in Michigan and how many are individual policies.
The Zebra based its report on an analysis of 61 million car insurance rates between September and December 2018. It used the same profile: A 30-year-old single driver with a 4-year-old Honda Accord EX and a good driving history. Coverage limits were set at $50,000 bodily injury liability per person/$100,000 bodily injury liability per accident/$50,000 property damage liability per accident with a $500 deductible for comprehensive and collision. The driver’s gender was changed to female to obtain rate differences.
Connolly said it’s interesting to see that the gender differences in auto insurance pricing have shifted in recent years.
“Up until a few years ago, men paid more nationally and in a majority of states,” Connolly said. “Now, it’s women who pay more. And we do see a growing disparity.”
The number of states where women pay more than men for the same car insurance coverage has more than doubled since 2016, The Zebra found.
In states where men paid more for auto insurance than women in 2018, the widest gaps were in Wyoming, where men paid $47 more for car insurance than women; Rhode Island, with a $42 gender gap, South Carolina, with a $41 gender gap, and Georgia and Tennessee, which tied with $41 gaps.
“I think the controversy was that gender existed as a rating factor at all. And over time, people became aware of that and maybe they tugged at their legislators sleeves and said, what’s the point of this? It seems like discrimination,” Connolly said.
“And in most of those states, most recently California, they looked at the data, because insurance companies have to file statistically valid reasons for changing their rates, and they said, ‘That’s no longer valid. We don’t think this is a necessary piece of information for you to have about an insured driver,’ and so they removed it.
“Gender is not the only one that’s gone. A lot of states outlaw things like credit rating or marital status or your education to be used in pricing auto insurance rates. A lot of people are saying my rates should only be based on my driving.”
Auto insurance rates in Michigan have made headlines in recent years because of how much it costs for all people — regardless of gender — to buy it. In the state that put America on wheels, it costs more than anywhere else to drive, The Zebra found in aprevious analysis.
Michigan leads in insurance rates
Michigan’s auto insurance rates top the nation, Connolly said, because of its generous no-fault insurance system, which requires all drivers to buy coverage for potentially unlimited medical benefits. Detroiters pay more because the roads are busier, there are more crashes and thefts in the city, and because more people make claims in the city.
“It’s surprising for a lot of people, given Michigan’s proximity to some very low-cost states in the Midwest, including Ohio, Illinois, Indiana,” Connolly said. “Michigan has unlimited injury protection required. So insurers have to pay out lifetime medical coverage for people who are injured and have that protection. That costs a lot of money for the state.
“That’s why Michigan stands apart for car insurance and why it’s such a big issue for the Legislature as well.”
Michigan lawmakers failed to pass no-fault auto insurance reform in 2017, but many leaders in the House and Senate have pledged that changing the system is among their top priorities.
Gov. Gretchen Whitmer mentioned car insurance reform in her State of the State address, and Detroit Mayor Mike Duggan made a failed attempt last year to force change through the federal court system.
Though efforts are underway to bring reform, even if change doesn’t come to Michigan’s auto insurance laws, Connolly said all consumers should question the price they’re paying for auto insurance and shop around.
“The biggest thing consumers should do is look at their own policies and talk to their own insurance companies and look at different quotes that they can get for the same insurance coverage from one insurer to the next.
“Because even if all of these rating factors are legally allowed to be used to price insurance in a state, it doesn’t mean every company is doing it. They all have different algorithms and different ways they would price a consumer. The same company is not the same for everyone. If they’re frustrated by the price that they’re seeing, there might be another company that works better with their level of risk.”