Insurance companies are legally locked in to having to pay out 85% of what they bring in back out to their customers, and they try to just barely hit that mark every single year. If you’ve ever gotten a little “customer appreciation” check mailed back to you from your insurer that 85% law is the real reason. It means they didn’t pay out quite enough.
So that being said, insurance companies charge higher rates in areas where the most claims happen. They aren’t making more money when they do this. They’re still capped at making their 15%.
So for an insurance company there’s three options.
-Charge everyone everywhere the same, so people in low claim areas are forced to pay higher prices, which means they’ll try getting insurance elsewhere.
Charge more in areas where claims payouts are highest. Which seems like it would be fair.
-Stop offering insurance at all in areas with higher risk. Which means that people living in certain places may end up not being able to find an insurer.
The article is trying to present this as a race issue, and that’s just total bullshit. It’s just based on likelihood of cars to get damaged in the area you live at. No one here who’s been to Detroit will argue that your car is just as safe there as it is everywhere else. The crime, and poor driving habits, and likelihood of a person walking out in front of your vehicle are all higher than elsewhere.