In February 2018, the Consumer Federation of America (CFA) published an auto insurance study that revealed low mileage drivers typically pay the same as high mileage drivers.
Most consumers assume premiums are largely based on the amount of time they spend on the road, as well as their driving records. However, CFA’s investigation points out that this is simply not true.
In fact, CFA emphasized that auto premiums are mostly influenced by factors like a driver’s credit score, level of education, occupation, and whether they own or rent a home.
Insurers have not denied CFA’s conclusion completely and agree they do put more weight on some non-driving characteristics.
Auto insurers explain their rating systems are mostly based on the driver’s overall risk of filing a claim and not necessarily their risk of having an accident.
All of this debate prompts most consumers to wonder: how did the CFA conduct their most recent study? Which insurance companies fell short in the CFA report? What, if anything, can be done to benefit low-mileage drivers?
How the study was conducted
CFA developed 275 basic liability quotes from five large insurers in 12 urban areas.
All of these rate quotes were created by using a hypothetical woman driver.
CFA’s example female was a single, 30-year old bank teller with a high school diploma. The driver profile indicated she was a renter, with a moderate income, had a perfect driving record, and drove a 2005 Honda Civic.
CFA put their imaginary driver’s information through the quoting systems of GEICO, State Farm, Progressive, Farmers, and Allstate.
Each carrier was quoted using annual mileage between 2,500 and 22,500. CFA relied on increments of 5,000 miles.
They followed this same formula in each of the 12 test cities: Atlanta, Baltimore, Boston, Charlotte, Chicago, Cleveland, Houston, Minneapolis, Oklahoma City, Rochester (NY), Tampa, and Los Angeles.
The study results
The overall results of this low-mileage study consistently showed zero discounts from Progressive and Farmers, except in Los Angeles.
In Progressive’s defense, they do make it clear in all marketing materials that drivers pay the same rate whether they drive 50 or 50,000 miles a week.
Instead Progressive encourages customers to sign up for its driver monitoring program, called Snapshot, which can equate to as much as a 15% discount. The Snapshot program focuses on quality of driving rather than distance.
The other carriers in the study offered modest discounts no matter how low the mileage. The CFA found the following minimal decreases in premiums: State Farm 3.2%, Allstate 2.9%, and Geico 1.3%.
Los Angeles was the only metropolitan area CFA tested which showed robust savings based on low mileage. This is because of California’s unique auto insurance regulations.
California is the Exception
In 1988 the State of California passed Proposition 103 which required auto insurers to use the number of miles driven annually in setting car insurance rates.
As a result, the Los Angeles quotes reflected discounts for low mileage drivers as follows: Geico 12.6%, Allstate 10.6%, Progressive 9.4%, Farmers 7.7%, and State Farm 2.9%.
CFA’s position is that all state legislatures and insurance commissioners should pass regulations similar to Proposition 103.
Insurers Refute the CFA Study
The most vocal rebuttal to the study came from the Property Casualty Insurers Association (PCI) which called the report “flawed and misleading”.
PCI stressed the fact that CFA focused exclusively on mileage rather than considering other underwriting principles. The Insurers organization referenced the following factors as being a more accurate barometer of a driver’s risk: the driver’s age, driving history, how long the driver has been licensed, and if the driver’s had gaps in coverage.
Another objection to the CFA study is that insureds tend to give inaccurate mileage estimates. So using mileage as the main basis for rating purposes would be flat-out inaccurate.
Of course, CFA countered with suggestions on how to better obtain accurate mileage estimates.
How Can Drivers Save?
Low mileage drivers reading the CFA report may wonder what they can do to secure the best premiums possible.
First, if you live in CA, AZ, IL, NJ, OR, PA, VA or WA, check into pay-by-the-mile car insurance such as that sold by Metromile. They are one of the few companies that actually do reward you, generously, for driving less.
Second, industry insiders say drivers should notify their insurance carriers of any meaningful changes in annual mileage. Driving less because of a career change or life change may not drastically change premiums. However, any savings are worth pursuing.
Finally, drivers should shop their policies periodically among the large group of insurance carriers.
It’s important to take advantage of the competitive auto insurance market.
Low mileage drivers may not save money because they stay off the road. Instead they will save premium dollars when they drive their business over to another company.