Warning: this post is laden with sarcasm.
According to US data from 2012, high school dropouts pay the most for car insurance over their entire lifetimes. They pay $700 more than high school graduates and $2154 more than college grads and Ph.D. recipients.
As you know, auto insurance companies usually charge higher rates to people they consider higher risk. So then, out of all the things they analyze, including age, type of vehicle, geography/postal code, driving record, etc., is level of education part of the whole?
Does having a lower level of education make you an unconditional risk? And more importantly, is that even fair?
Insurance regulators have debated and scrutinized this aspect of auto insurance premium calculation, which happens when insurers pool various sets of data and statistics into one package for one individual. These statistics do not save room for the fact that everyone is different, however.
As you may have heard, men (especially young men) pay more for car insurance than women (and young women). Something that you may not have heard is that there are discounts available to people with higher levels of education.
This does not apply to every single auto insurer out there, but it is definitely a thing. And though this doesn’t mean that you get explicitly penalized for not going to post-secondary education, it kind of does, doesn’t it?
Who cares if you can’t afford college or you started a business after high school and couldn't be bothered enrolling? Statistics don’t lie. Well, that’s what those insurers would say.
A review of auto insurance companies in Florida was able to prove that there was a real correlation between collected education levels and the corporate assumption of race and income.
Obviously, discrimination based on race is 100% illegal, and perhaps this educational standard was used as a replacement category. Geographical data can also be used as an identifier of minority or lower income status, which can then mark you as higher risk to institutions that simply look at your neighbourhood and make a judgement call.
GEICO was one of the most prevalent deniers of the claim that gathering educational statistics was used to discriminate against their customers.
One study pretended to request quotes from insurers and found that lower education levels equated to higher insurance premiums, even when age/vehicle/driving history stayed the same.
Another study by the Consumer Federation of America “found that some insurance companies charge anywhere from 12% to 45% less for auto coverage” to people that have a college degree. The savings escalate the more educational steps you climb. But how is this a foolproof way to determine risk? It's one of the problems with statistics, especially when you fall into one.
Insurance providers are supposed to offer fair and reasonable rates to customers, so how can discounts for differing levels of education be fair when a vast majority of people who do achieve those levels have some sort of privileged background to attend and financially survive through multiple rounds of post-secondary education in the first place? Shouldn’t they be paying more? Isn’t that just giving candy to a baby that already has her hands full of candy?!
Charging those without post-secondary educations higher premiums for auto insurance is a problematic issue because the people who tend to have lower levels of education are those from minority groups or lower-income areas. Wouldn’t it put them at a financial disadvantage since it supposedly takes more education to make larger salaries? Why charge those who are already socially and economically disadvantaged more?
Luckily, a lot of the articles used to research this blog post were published between 2011 and 2015, so hopefully, insurers have smartened up and/or been called out. It should be noted that it was very hard to find any Canadian data on the subject.
However, there are usually still drop-down menus that prompt applicants to betray their educational accomplishments. Insurers can choose to use this information in calculating your risk, or not.
It's up to you as a consumer to mull over the rest.
If you’re in the process of getting a diploma or degree, good for you; you may be on your way to discounts on auto insurance should you choose an insurer that provides them in this weird way.
This educational discount can be used two ways: either pick a provider that offers you a discount based on the education that you have as it stands, or pick one that doesn’t care about the letters beside your name.
And like we’ve said earlier, not all insurance providers participate. Your best option is to shop around by talking to a reputable broker. Next, find out if the company you’re interested in participates in any sort of discriminatory behaviour that masquerades as a benefit to some. If they do, simply take your business elsewhere to a company that practices balanced treatment of their clients.
Also, driver’s education classes will definitely score you a discount on auto insurance, so think about prioritizing accessible things like that before hopping into CHM300.
Another way to save would be by bundling your insurance policies with the same provider.