Decades Ago, We Had Redlining—Today, We Have Car Insurance Pricing

Lisa Steuer McArdle
· 3 min read
Recently Jerry revealed
car insurance
rates vary depending on where you live.
Not only that, but there’s also evidence to support the idea that car insurance rates also depend on the
type of community
that lives in a certain area.
Let’s take a look at what the data reveals about race and car insurance costs.
Jerry reveals that car insurance rates vary depending on the racial breakup of a community.

Car insurance by neighborhood

Jerry analyzed over 1 million car insurance quotes from July 2020 to July 2021. U.S. Census data was used to determine the racial breakdown of each zip code.
Race was segmented by white and non-white in this analysis. Asian American, Black or African American, American Indian/Alaskan Native, and Native Hawaiian/Pacific Islander was denoted as non-white. White or European American was denoted as white.
According to the data, communities with 0-5% non-white residents actually pay double the monthly
car insurance premium
of those in communities with 95%+ white residents on average. This trend is maintained for both male and female drivers.
For every 5% increase in white residents per zip code, the data indicates that drivers are paying $10 less on average in monthly premiums.
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Breaking down the numbers

Looking more closely at exact numbers, it’s revealed that communities with 0-5% non-white residents pay $354 on average per month for car insurance.
Meanwhile, the data also shows that communities with populations that are 95-100% white pay on average $168 for car insurance per month.
It’s a little bit of a shocking difference, and it can even be argued that the practice of "redlining" from the ‘30s has been born again in the world of car insurance.

Redlining and car insurance

In the ‘30s, the common practice of "redlining" marked areas with higher percentages of Black residents as less worthy of government-insured mortgages that were implemented in order to stop a wave of foreclosures spurred on by the Great Depression.
According to
History News Network
, the government used color-coded maps to rank the loan-worthiness of neighborhoods in more than 200 cities and towns in the U.S.
Ranking neighborhoods as least risky to most risky using the letters "A" to "D," areas ranked as "D" were noted as areas where property values were most likely to go down—and were marked in red. Most of the "D" neighborhoods were predominantly Black.
Today, racial segregation and discrimination in housing is outlawed. But perhaps there is still an imbalance when it comes to car insurance.
More data reported by
The Balance
says that drivers in Black communities are quoted for premiums that are 70% more expensive than the premiums quoted for residents of white communities. That was according to a study done by the Consumer Federation of America.
The Balance noted that this was still true even when the study accounted for population density and income.

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