Troubleshooters: Auto insurance disparities on where you live vs. what you pay

LOUISVILLE, Ky. (WAVE) - The law says a person in Kentucky is not allowed to drive unless they have auto insurance.

How much does a driver pay and what factors are involved? For most, it’s the driver’s age, driving record, insurance score and even credit score.

But what if you take the same family with the same driving record, the same three cars and the same coverage, but the only difference is where they live in Louisville?

That’s what the Troubleshooters did to test out the allegation that people in the west end of Louisville are paying way more for auto insurance, more than double what people in other parts of the city pay, especially compared to people living in the east end.

A licensed insurance agent gave us quotes by running the same family’s three cars, currently worth $16,000, $9,000 and $3,000, but changing their address to put them in various zip codes around town.

Over in the east end in zip codes like 40223 and 40299 the yearly insurance cost was just over $3,000. In 40217, the Schnitzelburg area, it was just over $4,000. In the south end, 40272, it was $4,482.

However, in the west end, in zip codes like 40210, 40211 and 40212, the yearly insurance costs ranged from $6,318 to $6,653. Those zip codes have median household incomes ranging from $20,000 to $27,000 a year.

“It is appalling, because we’re making up what they don’t want to charge someone else,” Tayquan Spencer-Smith said.

He learned about this during insurance shopping while living in 40212.

“Me and my financial advisor thought about something,” Spencer-Smith said. “Would it be any different if we was to say I lived in east Louisville verses west Louisville? So we gave them an address for Anchorage, and they quoted $170 a month. So when I corrected my address and gave them my actual home address, they raised it to $260.”

We ran our findings by attorney Sam Aguiar, who had already seen the same disparity through his clients.

“Unfortunately, when I see these insurance numbers and rates, I’m not surprised,” Aguiar said. “It’s redlining is what it is. When you see your most impoverished community in Louisville have to pay three times what someone in east Louisville would have to pay for insurance, there’s something inherently wrong with that. What’s even worse about it is I hear clients with 30-year clean driving records, spotless, never been in an accident, but just choose to live in a zip code where they’re punished for it. It’s sickening.”

Insurance agent Denise Bentley had the same massive rate hike happen to her.

“When I moved back from Louisville to Lexington, nothing had changed,” Bentley said. “Everything had stayed the same, except I had moved in to 40211, and the insurance company said it’s because of the zip code you live in. Well, what does that have to do with my history with this company, my history as a driver?”

Bentley said the rate disparities she saw by neighborhood led to insurance fraud or going uninsured.

“You have limited resources, and you’re spending it to try to be legal in Kentucky,” Bentley said. “But when you have a choice between feeding children, or keeping your lights, gas bill on, you sometimes make these decisions. There’s not a month that goes by as an agent where people don’t call me and say the payment’s not gonna clear this month because I had this happen, or I gotta get back to school clothes.”

More studies are showing the same thing we found.

The Consumer Federation of America finding “predominantly African-American neighborhoods pay 70% more, on average, for premiums than other areas do” and “upper middle income individuals who live in Black neighborhoods paid a full 194% more for car insurance on average than upper-middle income individuals living in white neighborhoods.”

What’s the reason for this? Is it crime? When vehicle theft and vehicle break-ins over the past three months were mapped in LMPD’s Crimetracker, there was a heavier proliferation of it in listed the west end.

When crime data for all of 2021 was sorted, a west side zip code like 40211 was found with more vehicle break-ins than a larger east side zip like 40299. And 40211 had 230 motor vehicle thefts. That’s four times more than 40299.

A State Farm insurance agent, who would not go on camera, said the rate disparity has little to do with crime. He said it has to do with the frequency and severity of claims in an area.

He referred us to State Farm’s Public Affairs Specialist, who referred us to the Insurance Information Institute.

“Locations certainly could be used as a factor, especially if it’s a high crime neighborhood,” Scott Holeman with the Insurance Information Institute said. “If crime is known to happen, and there’s a lot of car theft, that could impact rates.”

“These insurance companies, when you look at their financials, it’s disgusting,” Aguiar said. “They make so much money. What I’ve seen, ever since I started practicing, is that insurance companies are going to target certain members, demographics, within the community. And it’s always people of color. Always. Always a stereotype and assumption being made.”

“Race and religion are never used in rates for insurance,” Holeman said. “That’s illegal, and any credible agent or insurance agency is not going to use that. And if someone believes that to be true, they need to file a complaint with their insurance company and contact the state insurance department and have that looked into.”

“It doesn’t matter what your insurance score is,” Bentley said. “It doesn’t matter what your driving record is. It doesn’t matter the length you’ve been driving. It’s just that zip code forces you to pay three to four times more than anyone else, and I still think it’s a way for them to get around redlining.”

The findings were presented to the Kentucky Department of Insurance, where they were asked if they are ok with the disparity.

They responded in an email, “This is not a Louisville-specific situation, as geographic location is a factor in figuring auto insurance rates. For instance, auto insurance rates are traditionally the highest in eastern Kentucky because of theft rates, lack of body shops, and road condition.”

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