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3/8/2006 Geico Overcharges the Uneducated NationwideGeico is charging 40 percent more nationwide to insure those with blue collar jobs and less formal education.  The nation's fourth largest automobile insurance company, Geico, charges a janitor with a high school diploma an average of forty percent more for car insurance than it charges a college-educated attorney. New Jersey Assemblyman Neil M. Cohen (D) introduced legislation yesterday to abolish the practice after stories appeared describing its effect on Garden State motorists. The rating method, however, is not limited to New Jersey. It is used in forty-three states with the nation's other top insurance companies under competitive pressure to adopt the same practice nationwide.TheNewspaper examined Geico policies covering a 30-year-old male with a perfect driving record in Louisiana. By changing only the level of education in the online price quote system, we found a graduate of a four-year college paid $823 for insurance compared with the $1088 rate for having only a high school diploma or associates degree -- nearly a third more. In California, we also found that one's job description played a significant role in the price paid. Again holding all of the variables constant, this time we changed the job description for each price quote. We found that an executive would pay $1054 for insurance, a technician $1182 and a clerk $1398 -- again, nearly a third more. By manipulating both the education and job status variables in Louisiana, one could pay in extreme circumstances 124 percent more. Eric S. Poe, vice president of New Jersey Citizens United Reciprocal Exchange suggests there is no correlation between education or occupation and the likelihood of an individual getting in an accident. "The insurance industry is not concerned about whether you will have an accident or not," Poe said. "They are concerned as to whether you will want to be compensated for that accident." Poe works for a not-for-profit insurance provider that does not want to adopt Geico's scoring tactics to compete in the New Jersey market. He sees it as a thinly veiled means of avoiding state and federal restrictions on insurance scoring based upon race and income. He also sees it as a means of generating an accurate list of names for marketing purposes. "Get the names of these rich individuals and sell them homeowners [insurance]," Poe said. "The most valuable list that anyone can sell is a list that is factual on affluent people." Such marketing is key to Geico's success. Most people know of the company through its familiar advertising campaign. With $502 million spent on ads last year, Geico became the number one advertiser in the country. "And I can't wait to spend more," Geico parent company Berkshire Hathaway's chairman Warren Buffett wrote in a letter to shareholders. The chart shows a sample of the different rates charged to white collar and blue collar employees in forty-three states. Article Excerpt:
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