It’s expensive to be black in America. From cradle to grave, for everything from starter home loans to burial insurance, African Americans are confronted with a paywall that demands they fork over more than whites. Driving a car, a critical element of the American Dream, is yet another area where being black incurs a surcharge. Studies find blacks are charged higher interest on car loans, quoted higher prices by car dealers and, according to a new ProPublica and Consumer Reports investigation, given far heftier car insurance bills. The report finds that between 2012 and 2014 in California, Illinois, Missouri and Texas, top insurers including Allstate, Geico and Liberty Mutual leveraged “premiums that were on average 30 percent higher in zip codes where most residents are minorities than in whiter neighborhoods with similar accident costs."
Those premium variances can ultimately amount to significant differences in blacks and whites' monthly cash expenditures, hurting African Americans’ buying power in other areas and life outcomes in general. ProPublica cites Chicagoan Otis Nash, who is black and lives in a majority-black neighborhood, and pays $190.69 a month in insurance costs for his Honda Civic LX, the only means he has of getting to his two jobs during his six-day workweek. Across town, Ryan Hedges, who is white and lives in a white neighborhood, is billed just $54.67 a month for insurance on his 2015 Audi Q5 Quattro. Based on a series of issues, from car cost to the number of accident claims filed in their respective communities, Nash’s insurance premiums should be lower than Hedges'. Instead, as ProPublica notes, Geico “actually give[s] a discount to the riskier white neighborhood.”
This practice of price gouging on insurance premiums for residents of black neighborhoods — which is another way of saying black drivers — held true again and again. The investigation looked at “more than 100,000 premiums charged for liability insurance” in the “four states that release the type of data needed to compare insurance payouts by geography.” Investigators defined “minority zip codes” as those with more than 66 percent non-white residents in California and Texas, and 50 percent in Missouri and Illinois, due to demographic demands.
The authors point out that while regulation of the car insurance industry varied in the states surveyed (California has the most government oversight in this area while Illinois rates near the bottom of the national list), those differences offer a broad-view look at how racist car insurance policies proliferate around the United States. “Some insurers whose prices appear to vary by neighborhood demographics operate nationally,” they write. “That raises the prospect that many minority neighborhoods across the country may be paying too much for auto insurance, or white neighborhoods, too little.”
"In all four states, we found insurers with significant gaps between the premiums charged in minority and non-minority neighborhoods with the same average risk. In Illinois, of the 34 companies we analyzed, 33 of them were charging at least 10 percent more, on average, for the same safe driver in minority zip codes than in comparably risky white zip codes. (The exception was USAA’s Garrison Property & Casualty subsidiary, which charged 9 percent more.) Six Illinois insurers, including Allstate, which is the second largest insurer in the state, had average disparities higher than 30 percent.
While in Illinois the disparities remained about the same from the safest to the most dangerous zip codes, in the other three states the disparities were confined to the riskiest neighborhoods. In those instances, prices in whiter neighborhoods stayed about the same as risk increased, while premiums in minority neighborhoods went up.
In Missouri and Texas, at least half of the insurers we studied charged higher premiums for a safe driver in high-risk minority communities than in comparably risky non-minority communities. And even in highly regulated California, we found eight insurers whose prices in risky minority neighborhoods were more than 10 percent above similar risky zip codes where more residents were white."
As always, respectability politics — America’s favorite lie, which holds that success will save black folks from racism — proves useless. ProPublica spoke with Los Angeles-based businessman Pernell Cox, a resident of a “wealthy enclave in South Los Angeles sometimes referred to as the ‘Black Beverly Hills.’” Turns out the Liberty Mutual subsidiary that insured Cox's cars “charges 13 percent more for a 30-year-old female safe driver in his neighborhood than in a zip code with comparable risk in Woodland Hills, a predominantly white suburb in north Los Angeles.” Cox’s two Mercedes-Benzes, career success and address couldn’t surmount the extra price of race.
"Learning that our community might be targeted for higher insurance rates than the risk is a reason for people to be angry," Cox told Chicago’s ABC affiliate.
Redlining, common American discriminatory practices that historically kept black people from buying middle-class homes and acquiring equity-building loans, was outlawed decades ago. But while anti-discrimination is a critical element in combating pervasive racism, laws can only curb unfair business practices to a point. From the moment ordinances were passed to stop bias in selling and lending, covert workarounds were created to ensure the system remained unchanged. Bill Corley, an African-American car insurance agent in the field since 1977, describes how the subterfuge works.
“Officially, you could write insurance anywhere you wanted to write insurance,” Corley told ProPublica. Unofficially, too many minority clients inspired questions Corely rarely saw asked about white clients. “They would ask you questions about people’s income levels and questions about neighboring properties — which I don’t really recall ever having to address when I was writing policies in other neighborhoods in the city.”
Today, the use of neighborhood racial demographics is an altogether unsubtle way insurers continue to shortchange black drivers. The effects of those discriminatory practices do more than siphon off dollars once they month; they cause a ripple effect, hurting black financial prospects overall. ProPublica found that “households in minority-majority zip codes spent more than twice as much of their household income on auto insurance (11 percent).” That’s money diverted not just from short-term necessities but from long-term investments as well, such as homeownership, which blacks are still denied loans for far more often than whites.
A 2017 study found that education attainment, spending, working endlessly or raising kids in a two-parent family never closes the ever-expanding racial wealth gap, the $13 to $1 net wealth difference between white and black households. Longstanding racial privilege, codified into programs like the GI Bill, helped build white wealth. Those assets and monies, particularly in the form of property, were handed down, giving successive generations of whites a leg up on their black contemporaries.
“Homeownership is the central vehicle Americans use to store wealth,” Demos senior policy analyst and study co-author Catherine Ruetschlin told Forbes, “so homeownership and access to homeownership are at the heart of that widening wealth gap.”
Who can save for a house when you're being unfairly nickel-and-dimed at every turn, on every front? The extra expense of being poor, we've long known, keeps people trapped in cycles of poverty. Add institutional racism to that equation, and the ante is effectively upped. As the case of Pernell Cox proves, a nice home and the right degree can’t break the system, which was fixed long ago.
Otis Nash says he’s on the "verge of homelessness” because his car costs are so exorbitant. ProPublica reports that he was nonplussed by the discovery that race weighs so heavily in his insurance payments.
“When you go to the richer neighborhoods, the red-light cameras kind of go away,” he told the outlet. “That system is kind of designed for you to fail.”