California auto insurers banned from considering gender in rates

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Hanna Horvath, CFP®Managing Editor & Certified Financial Planner™Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

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California auto insurers will no longer be able to discriminate based on gender. The California Department of Insurance announced earlier this month it would no longer allow gender as a variable in determining insurance premiums.

“The basis of it was that insurers should base pricing on how you drive not who you are,” said Carmen Balber, executive director of consumer advocacy group Consumer Watchdog.

California joins six other states — North Carolina, Hawaii, Massachusetts, Montana, Pennsylvania and Michigan — that already have legislation preventing gender discrimination in auto insurance rates.

How does auto insurance pricing work?

Insurers base rates on the likelihood that a driver will file a claim. They consider your address, driving records, how often you drive and for how many years you've driven, said Douglas Heller, insurance expert for the Consumer Federation of America.

In the past, a driver’s gender also played a role in how much their insurance premiums cost. While many people think men pay more for auto insurance, research from the Consumer Federation of American found that, starting at age 40, women with perfect driving records were likely to pay more than men with identical records for basic coverage.

Balber called the issue of discriminating by gender a “civil rights issue.”

“It’s really no better to use gender as a factor in insurance rates than race,” she said. “The past rules were just arbitrary and unfair.”

The rule won't go into effect until July 1, giving insurance companies in California a few months to submit their new rates to the California Department of Insurance for approval. Heller said the department would enforce the anti-discrimination rule going forward.

Keeping your auto insurance costs down

If you have high auto insurance premiums, the first thing you should do to get a lower rate is shop around. If you’ve never re-shopped before, you aren’t alone: More than 30% of Americans have never re-shopped for home or auto insurance, according to a Policygenius survey.

If this is you, you could be leaving money on the table. Re-shopping can often lead to lower premiums for policyholders. Policygenius can help you shop around for the best auto insurance.

Consider bundling your home and auto insurance with the same carrier. You can often get a discount. Other small measures include enhacing the security features on your car.

If you still don’t understand the ins and outs of auto insurance, you're not alone. Here are the answers to 20 questions about auto insurance you may be too embarrassed to ask.

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