OAI Study: Wealthier, Less-Diverse Areas of NJ Tend to See Lower Insurance Prices

Mar 26, 2013, 07:00 ET from Online Auto LLC

NEWARK, N.J., March 26, 2013 /PRNewswire/ -- What do areas of New Jersey that have less racial diversity, lower median household incomes, higher levels of poverty and lower education levels tend to have in common? Higher average auto insurance costs, according to a new study from OnlineAutoInsurance.com (OAI).

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The study looked at average car insurance costs for 49 geographical rating territories in New Jersey to find territory-based averages. Areas in the northeast ended up getting quoted the highest premiums.

Newark ended up being the priciest territory, coming in at 30 percent above the statewide territorial average. The average quote for Newark was also 80 percent higher than the least-expensive territory: Hillsborough. The average quote for all territories was $2,130.

The territorial price rankings were then compared with U.S. Census data on race, income, poverty levels, education levels and population density. The following are the results for race:

10 most-expensive territories:

  • 38% White
  • 36% Black or African-American
  • 3% Asian
  • 23% Other / Two or more races

10 least-expensive territories:

  • 85% White
  • 4% Black or African-American
  • 8% Asian
  • 3% Other / Two or more races

The results are similar for things like median income. The average median income for all of the ZIP codes in the 10 least-expensive territories was 2.5 times as high as the 10 most-expensive territories. That means areas with the lower median incomes may actually have to pay more for coverage.

"This is a case of correlation rather than causation," says OAI manager Cesar Diaz. "What the study shows is that insurers are likely seeing worse claims trends in certain areas. The prices are higher because of the claims trends, not because of the socio-economics. Insurers aren't allowed to charge drivers different rates based on their race or income."

There wasn't always a one-to-one relationship between a territory's socio-economic factors and its auto insurance ranking in the study. For example, Newark was the No. 1 most-expensive territory, but it had the fourth-lowest average median income. And the Wilingboro territory had racial demographics similar to the most-expensive territories but was ranked 26th for auto insurance costs. In the end, though, there were stark socio-economic contrasts between the top 10 and bottom 10 territories for auto insurance quote sizes.

Check out the full study here.

SOURCE Online Auto LLC