Study Finds Poor Priced Out of the Car Insurance Market

The poor are increasingly being priced out of the car insurance market, the Consumer Federation of America (CFA) reported. A study from the group discovered that in 24 out of 50 of the nation’s largest urban areas, there was at least one zip code where all the annual auto premiums on the market exceeded $500 a year.


This often puts poor people in a terrible quandary; in much of the United States, the only way to get to work, school, or the grocery store is to drive, yet the poor cannot afford to drive because of high insurance premiums. A poor person who needs to reach his or her job to buy food and pay the rent may have no choice but to drive without insurance.

It hurts everybody else because the cost of injuries and damage done by accidents that persons driving without insurance get into has to be covered by other drivers’ policies. Some states even mandate uninsured motorists insurance, which is a sort of tax on the middle and upper classes to support the working poor. This, of course, raises rates higher, which leads to more uninsured motorists on the road.

The Federation did not propose any solution to the problem, although much of it is caused by lousy state laws. Many states mandate so-called single payer insurance in which nobody is held responsible for accidents. That means insurers cannot reward good drivers with lower premiums. An insurer cannot offer a basic liability-only policy for poor drivers.

Detroit has the nation’s highest auto insurance rates because of Michigan’s bizarre legal system. Among other things, drivers in Michigan are responsible for supporting individuals injured in accidents for the rest of their lives. If that wasn’t bad enough, Michigan politicians’ idea of fixing the problem is to add more fees to insurance.

In other states like Louisiana, the high number of personal injury lawsuits after car accidents drives up insurance costs. Large numbers of poor or uninsured drivers contribute to this because such lawsuits are often the only way a lower income person can get his or her expenses paid after an accident.

Another big problem is that there is little or no mass transit in many American cities. A poor person has to drive because there is no alternative. The situation is getting worse because neighborhoods around transit stations in cities like Denver are getting gentrified. The middle and upper class are buying up all the homes within walking distance of the train station.


That, of course, creates a cruel dilemma. Those who can afford the higher insurance rates have the option not to drive or own a car. The poor people who can barely meet the rent or the mortgage have to own a car, maintain it, pay for gas, and buy insurance.

There are some obvious solutions to this terrible situation. The most obvious is to reform insurance laws so that insurers can offer basic products the poor can afford. Another would be to create some sort of real national health insurance system (not Obamacare), so medical costs, which are the main expense after a car accident, would be covered.