Are American Car Insurers Discriminating Against Immigrants?

Forums: Legal, Immigrants, Insurance, Discrimination, Auto Insurance
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Ever since getting my driver license in May 1988, I have been driving accident-free. My sole moving violation has been a ticket for going 70 in a 65 zone. So I'm a tame driver, a low risk to the company that insures my car. US insurance companies, alas, won't see it that way. They refuse to consider the lion's share of my driving record and keep charging me like a beginner. Is that discrimination?

Let me explain. I am an immigrant from Germany. Consequently, it was Germany's Motor Vehicle Commission, the Kraftfahrtbundesamt, that issued my 1988 driver license. And it was on German roads, of course, that 20 years of my 25-year driving history has happened. But when you ask American car insurers for a quote, they'll only ask you how long you have had an American driver license, and how many accidents you have had while driving in America. And what's more, not only won't they ask you about any foreign part of your driving history; they'll refuse to even listen when you try to volunteer it.

So that's what keeps happening to me. US insurance companies consistently assign me to a wrong risk pool, one that's dominated by 21-year-old college kids, driving with the average college kid's appetite for risk and the average college kid's experience at driving. (A frequent checkbox I'm getting during the online-quote process is, "are you a student who drives to school, or are you living on campus?") With a realistic driving history entered into the online questionnaires (25-years, no accident ever), the quotes I'm getting are cheaper to the tune of several hundred dollars a year. So by artificially putting me into an unrealistic risk pool, insurers are overcharging me by this much for the actual risk they're insuring me against.

And this brings me to my conjecture for this thread, which goes like this: As applied to me and others in my situation, the policies by which American car insurance companies' assign drivers to risk pools constitute discrimination against foreign-born Americans. (Or in my case, foreign-born future Americans). Now I have three questions about what to do with this:

Does my conjecture have any merit? Or is my acute annoyance with the insurers' operating procedure clouding my judgment? (As you might guess, my policy is up for renewal these days.) If there is no merit to it, feel free to skip the rest of my questions.
If there is merit to it, is there enough meat there to file a lawsuit? How would I go about filing such a lawsuit? And whom would I sue? The practice is common to all American auto insurance companies, not just any particular one.
Would it be worth the trouble for me?
Would it be worth the trouble when considered as a public service to my fellow immigrants?

Okay, so those were four questions. (As Monty Python might have said, "amongst our questionnaire are such issues as . . . .") Anyway, what do you guys think?

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@Thomas,

Thomas wrote:

Now I have three questions about what to do with this:

Does my conjecture have any merit? Or is my acute annoyance with the insurers' operating procedure clouding my judgment? (As you might guess, my policy is up for renewal these days.) If there is no merit to it, feel free to skip the rest of my questions.

Are you asking if you're being discriminated against? Sure. Insurance companies discriminate against all sorts of groups. That's what insurance companies do.

Thomas wrote:

[*] If there is merit to it, is there enough meat there to file a lawsuit? How would I go about filing such a lawsuit? And whom would I sue? The practice is common to all American auto insurance companies, not just any particular one.

Unlikely. Unless you're in a protected category (and foreigner isn't), you probably can't sue under state or federal anti-discrimination laws. I doubt there's anything in the NJ insurance code that would help either.

Thomas wrote:

[*] Would it be worth the trouble for me?

Unlikely.

Thomas wrote:

[*] Would it be worth the trouble when considered as a public service to my fellow immigrants?[/list]

You'd be better off trying for a legislative solution rather than a judicial one. Try writing to your state legislators.

1 Reply

Insurers can only insure against quantifiable, checkable risks. I do know that American immigrants to Britain can get huge quotes by insurance companies for insurance because of their short or non existent local driving history. I also know that some American immigrants to the UK have had success getting insurance companies to take account of their US "no fault" history. Rather than do the searching themselves, these people often go to businesses called "insurance brokers" which specialise in finding the cheapest quote for drivers. Possibly there are corresponding possibilities in the USA.

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@joefromchicago,

joefromchicago wrote:

Are you asking if you're being discriminated against? Sure. Insurance companies discriminate against all sorts of groups. That's what insurance companies do.

Yes, but this particular discrimination is against a class of people (foreign-born Americans and permanent residents) whose defining trait

is immutable,
is irrelevant to their ability to contribute meaningfully to the society of motorists,
has historically been subject to some prejudice and hostility, and
is small enough to have only weak power in the electoral process. Permanent residents, in particular, do not have the vote.

Granted, that's not quite enough to make it a suspect classification. (As you observed, we are not entirely powerless to protect ourselves through the legislative process). Nevertheless, the discrimination at issue here goes well beyond "what insurance companies do" in the course of their normal business.

joefromchicago wrote:

Unless you're in a protected category (and foreigner isn't), you probably can't sue under state or federal anti-discrimination laws.

If I were to sue, I would most likely be an American of German origin by the time I did it. So how about discrimination by national origin? I haven't dug out the precedents yet, but I'm pretty sure America's federal courts have upheld charges of discrimination against Americans of Chinese origin, Americans of Mexican origin, and probably Americans of other national origins. Granted, the discrimination I allege would be against Americans of all non-US origins. But the principle remains that national origin is at least a somewhat suspect category by which to discriminate. No?

joefromchicago wrote:

You'd be better off trying for a legislative solution rather than a judicial one. Try writing to your state legislators.

Will do, thanks for the idea. Of course, the two routes are not mutually exclusive. Smile

1 Reply

@Thomas,

Have you tried other insurance companies?

It seems to me that it would be in their financial interest to get your business given that you are factually a low risk driver.

Some company could make a profit by figuring that out. You just need to figure out which company that is and reward them with your business.

I suppose I am suggesting an Economic solution to this problem.

1 Reply

@maxdancona,

maxdancona wrote:

Have you tried other insurance companies?

Yes. It's the same thing all over the industry.

maxdancona wrote:

I suppose I am suggesting an Economic solution to this problem.

Kudos to you for that. I prefer this solution myself. I wouldn't be considering the judicial route right now if I hadn't tried the economic route and failed.

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@Thomas,

Have you tried to get a quote from a brick-and-mortar agent? Online quotes from folks like Progressive or Geico can't handle the nuances of individual situations. Online agencies may be cheaper for the masses, but they're not cheaper in all cases and you may find yourself with crappy coverage.

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@Thomas,

Have you tried contrex's suggestion to go through a broker?

The last time I switched insurers, I did a pile of online research, printed out the lowest 3 quotes I could find and then went to talk to a broker.

We talked for awhile, he explained he could always get people a better rate than online - and he did. After he showed me his quote, I pulled my print-out out of my knapsack to compare the numbers. He asked for the print-out. He then explained that if he could prove he'd taken business away from an online purchase, he could give me an additional discount - and he did.

I'm not sure it always works that way but I know that while insurers are trying to push people to quoting/purchasing online (saved costs on their end), brokers are fighting to keep business in their offices and they will fight with insurers for their clients. It would probably work best if you had other potential clients to provide. There may even be a secret market for foreign drivers that you wouldn't know how to access without the help of a broker.

~~~~

Are they discriminating? sure - they are picking the best possible risks based on mathematical odds. Insurance is all about actuarial science.

Given what Super Storm Sandy is going to cost the industry they're going to be particularly resistant to handing out deals freely this (and the next several) quarters.

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@Thomas,

Have you tried a German insurance company? Is that allowed?

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@Thomas,

Let's start an insurance company. There should be enough low risk immigrants to make it profitable.

1 Reply

@Thomas,

Thomas wrote:

Nevertheless, the discrimination at issue here goes well beyond "what insurance companies do" in the course of their normal business.

No, it's pretty much standard operating procedure for insurance companies. You're lumped into a group that has certain actuarial characteristics. As a result, you are rated at a certain risk, based on your membership in that class. You're not being singled out because you're foreign-born, and there's no intent on the part of the insurers to stick it to foreigners. This isn't like red-lining, where banks used census data and other ostensibly neutral factors to deny loans to blacks. This is just some lazy actuaries who can't be bothered to refine their data to account for variations among members of commonly accepted risk classifications.

What's especially curious here is that you're advocating a government solution to what is essentially a market problem. Shouldn't you be banding together with fellow foreign residents to form your own insurance company rather than relying on the government to solve your problems?

Thomas wrote:

So how about discrimination by national origin? I haven't dug out the precedents yet, but I'm pretty sure America's federal courts have upheld charges of discrimination against Americans of Chinese origin, Americans of Mexican origin, and probably Americans of other national origins. Granted, the discrimination I allege would be against Americans of all non-US origins. But the principle remains that national origin is at least a somewhat suspect category by which to discriminate. No?

I imagine an American citizen who lived overseas for many years would face the same kind of problems, so it isn't a problem that is unique to the foreign-born. And it's not like the insurers see you as a foreigner. They just see you as someone without much of a driving record. There's no invidious discrimination here, just routine discrimination among actuarial categories that insurance companies do all the time.

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@joefromchicago,

joefromchicago wrote:

No, it's pretty much standard operating procedure for insurance companies. [...]
I imagine an American citizen who lived overseas for many years would face the same kind of problems, so it isn't a problem that is unique to the foreign-born.

It's the very same here in Germany, and most (if not all) other European countries.

joefromchicago wrote:

And it's not like the insurers see you as a foreigner. They just see you as someone without much of a driving record.

THAT's different here: we get bad foreigners (e.g.from neighbouring countries), worse foreigners (e.g. from Russia, Poland) and those who have to pay the very most (e.g. from Bavaria Turkey).

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@Walter Hinteler,

Walter Hinteler wrote:

THAT's different here: we get bad foreigners (e.g.from neighbouring countries), worse foreigners (e.g. from Russia, Poland) and those who have to pay the very most (e.g. from Bavaria Turkey).

I guess every country outside the US has it's own version of Texans. Smile

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@joefromchicago,

joefromchicago wrote:

This isn't like red-lining, where banks used census data and other ostensibly neutral factors to deny loans to blacks.

Out of curiosity: In the red-lining cases, was there any showing that banks tried to stick it to blacks? Or were they just justifiably concerned with credit risks, believed that the average Black was a worse risk than the average White, and were too lazy to refine their data?

joefromchicago wrote:

What's especially curious here is that you're advocating a government solution to what is essentially a market problem. Shouldn't you be banding together with fellow foreign residents to form your own insurance company rather than relying on the government to solve your problems?

I should, and I would, if it wasn't for major barriers to entry into the insurance business (and to exiting it as a customer). The resulting market concentration, as well as the problems caused by it, are both predictable from microeconomics-101 principles and a valid Utilitarian justification for government action.

joefromchicago wrote:

I imagine an American citizen who lived overseas for many years would face the same kind of problems, so it isn't a problem that is unique to the foreign-born.

Thanks for this double-whammy. That's both a meaningful distinction in the justice issue and a practical guide for the concrete insurance-policy issue. I'll check if there are specialized insurers catering to former American expatriates, and try to get in.

1 Reply

(Think "Reply to all" here)

Engineer, contrex, JPB, and ehbeth:

Yes, I tried German companies (they're offering insurance policies for German travellers in the US, but nothing for expatriates.)
Yes, I've called agents at brick-and-mortar offices. No difference as far as this problem is concerned.
No, I haven't tried a flesh-and-bones broker yet, only an online broker. I'll try that, and I'll tell the broker to look for policies catering to American ex-expatriates.

Thanks for the ideas!

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@Thomas,

Thomas wrote:

Out of curiosity: In the red-lining cases, was there any showing that banks tried to stick it to blacks? Or were they just justifiably concerned with credit risks, believed that the average Black was a worse risk than the average White, and were too lazy to refine their data?

It's complicated. Red-lining was partly based on pure racism, but there were certainly some reasonable financial considerations that would have militated against lending to blacks. The problem, though, is that the racism fueled the financial problems suffered by black borrowers and it became an iterative process after a while. Blacks couldn't get credit, so they became bad credit risks, so banks wouldn't lend to them, ad infinitum. It was impossible to separate the pure racism from the objective lending criteria, so courts struck down the whole process.

1 Reply

@joefromchicago,

My husband and I bought in a redlined area in 1976. We're white. Only one bank of those we tried would process our applications at all: Allstate.

Edit to add that by now I don't remember the exact details. Did I physically enter every bank? Did we have to check a box for race on the application, this being after the civil rights act? Did we get skunked because we weren't married? I'm sure that was clear on the application. Was it only the address in the proscribed area that brought on all the no's?

1 Reply

@ossobuco,

ossobuco wrote:

Was it only the address in the proscribed area that brought on all the no's?

Yes. That's the essence of red-lining. An area was delineated on a map with (what else?) a red line. Residents within that area were not given mortgages or other loans. It was a practice that reinforced segregation in black neighborhoods and accelerated white flight in neighborhoods that were in transition. It had a particularly pernicious effect in Chicago in the 1950s and '60s.

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@joefromchicago,

There weren't that many blacks in our neighborhood that was about ten blocks away from what was a 'difficult' section of Venice called Oakwood. I surmised at the time that it might have been our choice of a house very close to the red boundary line that enabled us to get a mortgage. A lot of our neighbors were what I then thought of as "older". Do you know offhand (I can look it up) what years redlining had it's run? If it's many years, maybe a lot of those neighbors that were there when we bought had used their savings to purchase, or savings plus having the owner take payments.

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@Thomas,

I think that if the insurance companies had access to the European car accident/vehicular moving violations database in order to check on yours (and other immigrant driver's) driving history then this limiting your driver's history to your time in the US is definitely discriminatory. If on the other hand, they are not given access to this database of driver's history then your word that you have a spotless driving history that they can not verify.

Yes. It'd be great if major corporations used the honor system and took the immigrant's word of having a solid driver's history for granted but we are talking about profit hungry American corporations and all they care about is putting their customers into a negative position and increasing their monstrous profit line even greater.

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Are American Car Insurers Discriminating Against Immigrants?

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