Are you married yet? It would make your auto insurer happy if you were.
So much so, in fact, that they will offer you a cheaper rate for tying the knot. Premiums are on average about 11 percent lower for married couples.
The trouble is, the discount is at best a pricing strategy based on thin evidence about the safety of married drivers. At worst, it’s a system that penalizes low income and minority drivers.
It is another example of a proxy being used to set premiums instead of actual driving behavior–something insurers should have to rely on less and less given advances in technology.
The system also fails to account for the changing face of marriage. Many people are delaying marriage or not getting married at all. Some are in domestic partnerships that are every bit as committed as those who’ve taken a walk down the aisle.
Yet, the insurance industry continues to hold an image of an ideal client that may not comport with society.
Marital status may be a smaller factor than something like credit scores or where you live. Still, it’s another instance where one set of drivers winds up paying more for something that is not related to their driving.
Is that fair?
Car insurance: married vs single
To be sure, when compared with other non-driving variables, marriage has less impact on premium rates. Consumers with a poor credit score, for example, can pay twice as much as those with excellent credit, all other things being equal, as do those in predominantly minority neighborhoods.
Source: Quadrant Information Systems via CarInsurance.com
However, consumer advocates are concerned about the growing number of variables that come into play when setting premium rates. Unrelated factors can end up penalizing low-income, uneducated consumers.
“It comes in during the underwriting process,” explains Amy Danise, senior editor with EverQuote, which provides insurance quotes, about how marital discounts work. “It’s not so much a discount, which is more about whether you have anti-lock brakes or air bags in your car.”
Insurers usually find out about your marital status when you first apply for insurance, and then if you add a spouse or second car to your policy. The discount applies for same sex married couples with most insurers, though the Consumer Federation of America, a consumer watchdog group, says that varies by state and by insurer.
Some insurers may also offer the discounts for domestic partners, but that practice isn’t as widespread as the discount for marriage.
Why the discount exists
Insurance rates used to be based on just a few things—driving record and driving experience mainly. But in the 1960s and 1970s, insurers gained access to a much wider set of data about their customers.
There was an explosion in the number of classifications they started using to try to figure out which types of people would be more likely to file claims and therefore cost them more. These were the customers they charged more.
“The insurance company that has the most classes is the insurance company that sets the classes for the industry,” says Robert Hunter, director of insurance with the Consumers Federation of America and former Texas State Insurance Commissioner. “Most companies will follow suit if their competitors do it.”
Yet insurance groups aren’t able to share the actual research they base this judgement on, though there’s an insistence that the practice is actuarially sound.
“The statistics bear it out,” says Robert Hartwig, clinical associate professor and director of the Center for Risk and Uncertainty Management at the University of South Carolina and past president of the Insurance Information Institute, a trade group. “Individuals who are married tend to expose insurers less to overall claim costs.”
The closest consumer groups have come to getting a justification from the industry is a 2004 study that insurers say proves the point. But the report was released years after the practice of marital discounts was already well established.
For what it’s worth, the study did show that never-married people have a higher driving injury rate than married people. Consumer advocates criticize the study because it’s based on data collected in New Zealand in the early 1990s and involved only 138 injuries, a substantial number of which also involved motorcycles.
Further, the difference in injury rates between married people and singles was only about one percentage point.
Are married drivers safer?
Anyone who studies statistics knows that correlation and causation are not the same. Even if married people have fewer accidents–and fewer claims--it may not be their marital status that accounts for the behavior.
Married people may share other traits in common that could be the reason behind their supposed safe driving.
“If you want to find correlation between any two things, you probably could,” says Amy Bach, executive director of United PolicyHolders. “You might find a correlation between people who like butter and auto accidents too.”
Singles are more likely to be younger and less experienced drivers. Those types of drivers have more accidents because they haven’t had enough experience to learn defensive driving maneuvers or when not to get behind the wheel, such as after drinking too much or pulling an all-nighter.
“I think the data [around single drivers] is probably biased by young men, who tend to have really high incidents of accidents and tickets,” Hunter says. “There are a lot of people who are excellent drivers who are now widows and they’re not bad drivers now that they’re single.”
The decline of marriage
Given demographic trends, a smaller proportion of people are able to take advantage of this discount.
Marriage rates have plummeted by 60 percent since 1970, reaching their lowest rate in a century, according to research from Susan Brown, co-director of the National Center for Family and Marriage Research at Bowling Green State University.
Source: Based on analysis of US Census Bureau data
The portion of the adult population that is single is bigger than ever, making up 45.2 percent as of 2017, according to the U.S. Census Bureau.
Marriage discounts penalize low-income, less educated consumers
Though it seems like marriage is an equal opportunity arrangement, it’s not. Marriage among low-income people, in particular low income Latinos and blacks, is on the decline.
Source: Based on analysis of US Census Bureau data
These groups are more likely to be penalized with higher premiums because of their lower credit scores and which neighborhood they live in too. Marriage becomes yet another reason they pay more for something that has little if anything to do with driving.
Equal opportunity discrimination
In addition to young singles, older widows and divorced people also see higher rates. In fact, with some insurers, a widow could see her rates increase by as much as 226 percent following the death of her spouse, according to a study by the Consumer Federation of America.
The CFA studied six insurers in 10 major cities, using a hypothetical 30-year old, safe, female driver. When the driver’s age was increased to 50, a widow still paid more than a 50-year old married woman, showing that it’s marital status that drives the disparity.
Source: Consumer Federation of America
To Hunter of the CFA, it’s another way insurers charge more to groups of people who are least able to afford it.
All just a marketing strategy?
In their business model, insurers try to balance two sometimes competing things. First, they want to court customers who won’t file many claims. Next, they also want to focus on profitable consumers who might buy more than one insurance product.
To insurers, the existence of a marriage license is a shorthand for customers who have other insurance needs.
“It’s less actuarial in nature than a market strategy,” says Hunter.
In fact, cross-selling is seen as the key to company profits, according to a report from business consultant Bain & Co. At one insurer that Bain profiled, 40 percent of its customers have both auto and home insurance, and those customers have a lifetime value to the insurer that is two to four times higher than customers who have just one product. The report goes on to say:
“Improvements in cross-selling can generate huge value in both [property & casualty] and life [insurance]. Customers owning more insurance products stay longer, as evidenced by a much lower churn rate at any stage of the relationship for people who have multiple contracts relative to those with just one.”
Married people have a higher chance of fitting the bill. According to researchers, they have greater financial security than singles because they are able to pool their assets. They are more likely to own a home and have children. They might even own a second home and a boat, giving insurers additional ways to sell policies.
Consumers aren’t aware
Like many aspects of insurance, consumers may not know that they are being treated unfairly because of they don’t have a ring on their finger.
“The problem we have with insurance rating in general, is that it’s pretty opaque,” says Bach, of United PolicyHolders. “They will say that people who are married are calmer, they’re less wild, they’re less likely to get into an accident. There might be some truth to it statistically, but we don’t know because they won’t share their data.”
Without access to the data, it’s hard to make a counter argument.
Even the Insurance Information Institute, the industry group, couldn’t point to the specific study that justifies higher rates for singles when we asked.
“Insurance is very heavily regulated,” says Michael Barry, director of media relations with the III. “The insurer for their part has to prove that there is an actuarial justification for the use of this criteria and the regulator has to sign off on this.”
Yet regulators themselves may not be comfortable with the practice. The National Association of Insurance Commissioners’ voiced concern about marriage discounts. In a 2017 report, the group wrote:
“We join the [Consumers Federation of America] in the call to state insurance commissioners to ban the use of marital status as a pricing factor in states where it is still permitted.”
California has curbed the use of non-driving variables in the pricing of auto insurance when voters passed Proposition 103 in 1988. Since then, insurers have been required to use three variables in descending as the primary determinants for setting rates: driving record, miles driven per year and experience. Only after that can insurers bring in other factors.
“As a result, those other factors, including marital status, have much less impact,” says Hunter.
A better way
At Cover, we don’t think an insurance company should care if you’re married. It’s your attention to the road, your driving behavior and experience that determine what kind of risk you are on the road.
This means alternative tools to assess driving risk based on what you actually do behind the wheel, such as telematics. Those tools will give you more transparency to know what goes into setting your premium.
This could also mean things like using technology to deter distracted and drunk driving, prescreen for damaged assets, and better identify forms of fraud.
With initiatives like this, we wouldn’t be asked to believe that just the act of walking down the aisle make you a better driver.
Other ways to save
Building this fairer system will take time. So, for now, if your relationship status puts you in a position of paying more for auto insurance, try these tips:
1. Shop around
Not all carriers use marital status as the basis for setting rates. If your first quote comes from an insurer that does, try another.
2. Get your discounts
Marital discounts aren’t the only discounts available to drivers. You might be able to save on insurance if you have a master’s degree, drive less than 8,000 miles a year, or are a member of certain trade organizations.
3. Bundle up
If you have homeowner’s or renter’s insurance, ask about bundling it together with car insurance from the same carrier to get a discount on both.
4. Mind the road
No matter the discount, driving record matters a lot, so make sure you maintain an impeccable one.