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Even if a crash is not your fault- your insurance premiums could still go up

A new study by the Consumer Federation of America finds many insurance companies raise auto insurance premiums even after drivers get in a car wreck that was someone else's fault.

According to the study released Monday, some innocent drivers' premiums went up as much as $300.

The insurance industry insists that even when it's not your fault, statistical ratings show that if you're in one crash, chances are you'll get in another.

According to the Property Casualty Insurer's Association, collision history is among the many factors that are predictive of whether or not you're going to have a claim.

Researchers at CFA say there's no reason for you to be charged more, simply because someone else hit your car.

"We don't like this kind of treatment," said CFA insurance expert Doug Heller.

Heller said his team analyzed premium quotes from the five largest auto insurers in the country.

They compared premium hikes in 10 cities for drivers whose hypothetical profile included a past accident where another driver was at fault. The study focused on Los Angeles, Oklahoma City, Atlanta, Chicago, Jersey City, Kansas City, Jacksonville, Minneapolis, Baltimore and Queens, New York.

According to the study, only two of the 12 states analyzed - Oklahoma and California - prohibit insurance companies from hiking premiums after a policy holder's vehicle has been damaged in a crash where another driver was at fault.

While no city in Washington state was included in the CFA study, the Washington State Insurance Commissioner's office confirms not-at-fault premium penalties are not prohibited here.

Heller said only one company in the study did not impose premium hikes after a not-at-fault collision.

"The nation's largest, State Farm, never punished people for these not-at-fault accidents," said Heller. "But, the other big companies seem to. And for those companies we have a message: 'It's unfair and it should stop.'"

Heller said the study also found the penalties were higher when researchers changed the driver's insurance rate comparison profile to reflect someone less educated with a substantially lower income. CFA considers that discrimination against low income drivers.

Insurance Industry Response

The insurance industry calls the study flawed, arguing CFA did not apply the same risk factors when they compared quotes online.

The Property Casualty Insurer's Association provided the following statement in response to the release of the CFA report:

CHICAGO, IL - The following statement by the Property Casualty Insurers Association of America (PCI) is in response to the recent study by the Consumer Federation of America (CFA) regarding auto insurance rating. The following statement can be attributed to David Snyder, PCI’s vice president of policy development and research.

“The CFA’s latest study on auto insurance pricing is flawed and misleading. The central flaw in the report is that it fails to take into account that all the rating and underwriting factors insurers use are proven to increase the accuracy of predicting the risk of loss."

“The most glaring errors in the study are the assumptions used to gather results. In particular, the driver profiles used by the CFA are skewed and calls into question their findings and conclusions. Prior auto insurance is a commonly used rating factor that is highly predictive of future loss. Rather than using the same prior insurance status to compare the moderate and higher income driver, CFA used no prior insurance for the moderate income driver, but three years with the same insurer for the higher income driver. The result is a study that provides no real insights about the effect of a not at fault accident on premiums. Additionally, the report fails to take the wide variety of state laws that address what is considered an at-fault accident. While some states have blanket prohibitions, other states address the specific circumstances CFA provided as examples such as being hit while parked, or struck from the rear. The end result is a report that attempts to present auto insurers negatively = but fails to provide consumers with accurate or useful information."

“The findings relating to not at fault accidents are overly simplistic. The facts of each incident, numbers of incidents, company policies and state laws all can affect the impact of non at fault accidents, if any. Consumers should check with their companies and agents before assuming the impacts of such accidents."

“The main factors that determine what a driver pays for insurance include things such as the number of years of driving experience, previous claims, miles driven, the type of vehicle and type of coverage purchased. Insurers use a wide variety of factors that have proven to be effective in predicting the likelihood of filing an insurance claim or having a loss. By using a variety of rating factors, insurers are able to develop a more complete picture of a driver’s risk profile and provide a more accurate and competitive pricing that benefits consumers."

“Consumers should be assured that auto insurance pricing is closely scrutinized by state insurance regulators and is subject to rigorous actuarial standards which ensure that all rating factors comply with the law. If consumers are not happy with an insurance quote or the cost of insurance, they can always shop around for a better price or another company among the dozens of competitors in each marketplace. The auto insurance market is highly competitive and consumers have a large variety of choices."

PCI is composed of nearly 1,000 member companies, representing the broadest cross section of insurers of any national trade association. PCI members write more than $183 billion in annual premium, 35 percent of the nation's property casualty insurance. Member companies write 42 percent of the U.S. automobile insurance market, 27 percent of the homeowners market, 32 percent of the commercial property and liability market and 34 percent of the private workers compensation market.

Push for state-level action

The Consumer Federation of America is sending its findings to insurance regulators in every state in an effort to get lawmakers to take a closer look at what it calls unfair and even discriminatory pricing practices.

CFA urges consumers to contact their insurance companies and find out how a not-at-fault accident will affect their premiums.

"And if they are going to punish you, let 'em know that you don't like it, and you don't think it's fair," Heller said. "The first thing to do is speak up. The second thing to do is shop around."

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