Does level of education affect your auto insurance rates?

Warning: this post is laden with sarcasm.

Flashback fact:

According to US data from 2012, high school dropouts pay the most for car insurance over their entire lifetimes. They pay $700 more than high school graduates and $2154 more than college grads and Ph.D. recipients. 

Insurance and you

As you know, auto insurance companies usually charge higher rates to people they consider higher risk. So then, out of all the things they analyze, including age, type of vehicle, geography/postal code, driving record, etc., should level of education be part of the whole?

Does having a lower level of education make you a greater risk to your insurer statistically? And more importantly, is that even fair?

Benefits of education

As you may have heard, men (especially young men) pay more for car insurance than women (and young women). Similarly, there are discounts available to people with higher levels of education.

This does not apply to every single auto insurer out there, but it is definitely a thing. And, while this doesn’t mean that you get explicitly penalized for not going to post-secondary education, you won't be getting the best price either.

Who cares if you can’t afford college or you started a business after high school and couldn't be bothered enrolling? Statistics don’t lie. Well, that’s what those insurers would say.

Insurance regulators have debated and scrutinized this aspect of auto insurance premium calculation, which happens when insurers pool various sets of data and statistics into one package for one individual. While the stats seem to lean in favour of the insurer's position of greater risk among the less educated, these statistics do not save room for the fact that everyone is different. Unfortunately, this reality is unavoidable in the risk-based price assessment, which serves as the central pillar of insurance pricing considerations.

Insurance regulation studies

GEICO was one of the most prevalent deniers of the claim that gathering educational statistics was used to discriminate against their customers.

One study pretended to request quotes from insurers and found that lower education levels equated to higher insurance premiums, even when age/vehicle/driving history stayed the same.

Another study by the Consumer Federation of America “found that some insurance companies charge anywhere from 12% to 45% less for auto coverage” to people that have a college degree. The savings escalate the more educational steps you climb. But how is this a foolproof way to determine risk? It's one of the unavoidable problems with statistics, especially when you fall into one: that you personally might not represent the same risk as the majority of your statistical group.

Fairness

Charging those without post-secondary educations higher premiums for auto insurance can be problematic, as the people who tend to have lower levels of education are typically those from lower income families and neighbourhoods. This means that every missed opportunity for savings could mean the difference between staying afloat or going under any given month.

Luckily, a lot of the articles used to research this blog post were published between 2011 and 2015, so hopefully, insurers have smartened up and/or been called out. It must also be noted that it was very hard to find any Canadian data on the subject.

However, there are usually still drop-down menus that prompt applicants to betray their educational accomplishments. Insurers can choose to use this information in calculating your risk, or not.

It's up to you as a consumer to mull over the rest.

Shop around

If you’re in the process of getting a diploma or degree, good for you; you may be on your way to discounts on auto insurance should you choose an insurer that provides them for attaining a higher education.

This educational discount can be used two ways: either pick a provider that offers you a discount based on the education that you have as it stands, or pick one that doesn’t care about your level of education.

And like we’ve said earlier, not all insurance providers participate. Your best option is to shop around by talking to a reputable broker. Find out if the company you’re interested in participates education based risk assessment. If they do, and your attained level of education doesn't make the cut, simply take your business elsewhere to a company that won't penalise you for your briefer education.

Also, driver’s education classes will definitely score you a discount on auto insurance, so think about prioritizing accessible things like that before hopping into CHM300.

Another way to save would be by bundling your insurance policies with the same provider.