October 7th, 2011
Controversially, education levels can affect insurance rates. Carriers look at a host of factors -- driving record, what type of car you drive, location, etc -- in order to determine how much risk they are taking on when they agree to insure you. And one of the metrics that apparently gives them a better idea of your risk profile is your education level.
Of course this practice is not without its critics. Many believe that essentially charging non-college graduates more for car insurance is a discriminatory practice. Forty years ago insurers engaged in a practice called “redlining,” in which they pretty much drew red lines on maps to single out African-American and Latino-American communities. Car insurance rates were higher inside these zones. This practice is now illegal; actuaries and their employers now analyze different metrics to arrive at the most accurate rate.
New Jersey and Rhode Island have recently used the judicial system in an attempt to ban the practice of using consumers’ education levels in the car insurance rate-quoting process. These efforts have largely been unsuccessful to date, but the battle isn’t over.
We understand both sides of the debate. If the provider has data that indicates women are less risky to insure and can act upon that data by giving women discounted car insurance, why can’t education level be part of the equation as well?
Our advice is to use the system to your advantage, regardless of your level of education. If you’re not a college graduate, ask the car insurance carrier if it gives lower rates to people with a college degree. If it does, hang up the phone and call another provider who doesn’t engage in the practice. If you do have a college and/or advanced degree, ask whether your academic work has earned you a discount on your insurance -- and if it does, go with that provider.
Note: We now have specific data on exactly how much people pay at different education levels. Check out the data here.