Consumer Federation of California

Contact: Richard Holober / Brian Taylor

[CFC press release] GEICO Insurance Co. illegally deceives and discriminates against unmarried, lower or moderate-income motorists by quoting them much higher minimum automobile coverage levels than permitted under state law, the Consumer Federation of California (CFC) alleges in a petition filed today with the California Department of Insurance.

Having uncovered this scheme, CFC is calling on the Department of Insurance to enforce state insurance and civil rights laws by ordering GEICO to halt these practices and impose penalties, which may include fines and revocation of the company’s license to sell auto insurance. The targets of GEICO’s deceptive rate quotes are good drivers who have all of these characteristics: are unmarried, not employed in a professional or executive occupation, have not completed college, and are not currently insured. These targeted consumers who obtain an online GEICO quote are told the “Lowest Limits” coverages the company offers are at levels that are 500% to 1000% higher than the minimums required under law for good drivers.

California law requires insurers to offer good drivers a policy with minimum coverages of $15,000 for a single injury, $30,000 for injury to more than one person in an accident, and $5,000 for property damage, called a “15/30/5 policy.”

When a good driver living in California fills in the online tool on GEICO’s website, and tells the company that he or she is unmarried, and does not have a college degree, and is currently uninsured, and is unemployed or not working in a professional or executive job, the company website presents a rate quote for six months’ coverage that it labels as the “Lowest Limits” it offers: $100,000 for a single injury, $300,000 for injury to more than one person, and $50,000 for property damage, called a “100/300/50 policy” in CFC’s petition.

If that person is a professional or executive, or married, or a college graduate, or has current insurance coverage, GEICO’s website produces a “Lowest  Limits” quote for one month of coverage including $15,000 for a single injury, $30,000 for injury to more than one person, and $25,000 for property damage, called a “15/30/25 policy” in CFC’s petition. CFC alleges that the representation of $25,000 as “Lowest Limits” for these good driver quotes is a separate violation of California insurance law.

The resulting premium quotes range from 40% to 54% higher, and are $75 to $132 more costly for six months’ coverage for a 14-year-old compact car than the quote an otherwise identical driver would receive if that driver were married, or a college graduate, or in a higher-income occupation, or currently insured. The quotes CFC obtained on the GEICO website were for a 2000 Honda Civic.

“Our extensive analysis of GEICO’s online rate quote system found that it is programmed to target unmarried low or moderate-income drivers for inflated rates. Targeted motorists either pay for excessive coverages they are falsely told are the lowest available, or GEICO drives them away with these costly quotes. Either way, GEICO is breaking California’s insurance regulations and civil rights law,” stated Richard Holober, Executive Director of the Consumer Federation of California.

The civil rights complaint is based on GEICO’s discriminatory treatment of unmarried consumers, as well as its discriminatory treatment of women in the very recent past, which CFC documents in its petition.

Compounding the misrepresentation of “Lowest Limits,” GEICO quotes these targeted consumers a six- month premium payment amount. All other good drivers are quoted a one-month payment amount. As a result of this disparate presentation, targeted drivers see in big, bold font a payment amount as much as 900% higher than the payment amount GEICO shows an identical college grad, married, insured, or upper- income occupation driver.

State insurance regulations do not permit use of education, occupation, or prior insurance as “rating factors,” and therefore an insurer should not require a potential customer to furnish this information before it provides a rate quote, the CFC charges in additional allegations. An insurer may use marital status in setting rates – but not to mislead unmarried drivers about minimum coverage amounts. CFC’s petition cites this example:

“A single woman living in Fresno with a perfect driving record, who works as a vice president in a private company and has no prior insurance, will be offered a “Lowest Limits” quote on GEICO’s website for a 15/30/25 policy at $162.18 for a six month period ($324.36 per year). If that same woman indicates on GEICO’s website that she instead works as a cashier, she will be offered a 100/300/50 policy, described as a “Lowest Limits” policy, for $289.68 over six months ($579.36 per year) – a 54 percent difference in price.” The same switch in online rate quotes occurs if the driver changes educational attainment from college graduate to high school graduate, or from married to unmarried, or from insured to uninsured.

GEICO is the nation’s second-largest auto insurer. In California, it is the sixth largest, with one million auto policyholders who pay over one billion dollars per year for their coverage.

The company is subject to fines of $5,000 to $10,000 for each violation, which could number into the millions, given the company’s relentless marketing of its online quotes.

CFC is also asking Insurance Commissioner Dave Jones to consider suspending or revoking GEICO’s license to sell auto insurance in California.

“California voters enacted strong policyholder protections under Proposition 103 in 1988,” Holober said. “GEICO deceives vulnerable consumers by telling them that coverage levels ten times higher than the state requires are the lowest options available. GEICO should pay stiff penalties and be prohibited from selling their product in the state.”

CFC bases its allegations on extensive tests it conducted using the interactive rate quote tool found at www.geico.com. The CFC petition includes ten series of exhibits that provide examples of actual rate quotes obtained on GEICO’s website that incorrectly describe inflated coverages as the “Lowest Limits” it offers good drivers. An example appears is included at the end of this press release.

CFC submitted its petition to the California Department of Insurance in San Francisco. It cites violations of California’s Automobile Insurance Reform Act (Prop 103), California Unfair Insurance Practices Act and the Unruh Civil Rights Act.

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Since 1960, the nonprofit Consumer Federation of California has been a powerful voice for consumer rights.

Tags: Auto Safety, California Department of Insurance, CFC, Deceptive, GEICO, Insurance