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- California is the sixth state to ban car insurance companies from determining auto rates based on gender, according to The New York Times.
- While it could equalize rates for both genders, teen boys are expected to benefit the most with an average 5% decrease in their auto rates.
- Auto rates are determined by a variety of factors, including safety records, driving experience, your career, your vehicle’s safety features, and the cost to repair or replace the vehicle.
The move is an attempt to focus on factors that drivers can control, like their driving record, and to prevent unfair and inconsistent gender influences in pricing – some car insurers determined that girls were more high-risk drivers than boys, while others deemed the opposite to be true, Carrns reported.
Hawaii, Massachusetts, Montana, North Carolina, and Pennsylvania have also banned using gender to set rates.
In California, it looks like one gender will benefit the most from this change in law: teen boys.
“Removing the gender factor could in effect equalize rates for inexperienced drivers: Younger men, who have typically paid higher rates, on average might see declines, while younger women could see increases,” Carrns wrote.
“In an economic analysis of the change, the Insurance Department estimated that female drivers with three or fewer years of driving experience were expected to see the biggest impact, with rates going up 6% on average. Male drivers with similar driving experience could have a corresponding decrease of about 5%.”
The analysis was based on 17 companies that comprised roughly 66% of the state’s consumer car insurance market. Carrns noted that actual rates could vary depending on the individual and their chosen insurance company and coverage plan. Insurers will have to submit for review new “gender-neutral” plans by July, Carrns wrote.
Currently, the national average for annual car insurance premiums is $1,365, according to an analysis by insurance information website Insure.com. That’s around $113 a month. California exceeds that average, with an annual premium of $1,731 or monthly premium of nearly $145, Business Insider previously reported.
It currently requires car insurers to prioritize drivers’ safety records and amount of driving experience in determining auto rates, Carrns reported, but there are additional factors at play.
“Insurers use a complex algorithm to determine an individual’s premium, with profession making a big impact on the annual cost of an individual’s car insurance,” Simon McCulloch, the director of insurance at comparethemarket.com, said.
“An assumption on the time of day a professional is likely to be on the road, plus the number of hours behind the wheel, may be taken into consideration, in addition to the insurer’s claims experience with each job category,” McCulloch said.
Auto insurance companies also set rates based on a vehicle’s safety features and the cost to repair or replace the vehicle – but the color of the car doesn’t affect the rate, which is a common car insurance myth.
Regardless of the price of your car insurance premium, it’s illegal to drive without it. And aside from keeping you covered in the event of an accident, insurance also has unexpected benefits – like covering damages caused by riots, space junk, and rodents, as well as paying for your pet’s injuries.