Based in Princeton, New Jersey, Eric Poe, Esq., CPA, leads CURE Auto Insurance and has guided the company through significant growth, including a workforce of more than 300 employees and coverage for more than 85,000 vehicles. He oversees business strategy, underwriting, claims, loss control, litigation, rate filings, and re-insurance, while also contributing to marketing and creative decisions. His work relates directly to the use of income proxies in auto insurance because he has advocated before state and federal lawmakers for fair underwriting and pricing based on driving records rather than factors such as education, occupation, or credit score. With a background in accounting, finance, and law, he has received recognition from organizations including NJBIZ, ROI-NJ, the African American Chamber of Commerce of New Jersey, and the New Jersey Law Journal.
Examining the Use of Income Proxies in the Auto Insurance Industry
In the overwhelming majority of states, the law requires every driver to have car insurance to operate their vehicles. However, the premium each person pays varies based on a variety of factors, which often include factors that serve as income proxies, which have nothing to do with their actual driving safety records.
Income proxies are indirect indicators that insurance companies frequently use as a part of their process to help determine premiums. Rather than measuring how safely someone drives, these factors tend to focus on a person's financial situation. Income proxies may include a person’s level of formal education, their job title, and their credit score. Based on these factors, insurers often seek to identify high-income earners to whom they can sell additional products like home or boat insurance.
To ensure they remain profitable, insurance companies often use a tactic that amounts to a constructive rejection, where they set high premiums for working-class drivers, offering better, affordable rates to only those in high-income brackets. The working-class driver is the one who technically “rejects” the coverage due to the high premium, even though this “rejection” is the most viable outcome. Certain insurance companies avoid the low-income segments of the market without technically breaking laws that require them to accept those who drive safely.
Insurance Companies’ ‘s reliance on income proxies creates a tiered system that hurts low-income households. Research indicates that drivers with limited education often pay more for basic coverage compared to other roles where workers have formal education. One study found that New Jersey motorists with poor credit scores and no university diploma paid 40 percent higher than those with higher education. Such price disparities trap people in poverty cycles by making reliable transportation unaffordable.
There is also a link between income proxies and racial discrimination. While federal law bans using race to set rates, education levels and job titles often serve as functional substitutes. Data shows that minority groups usually have lower average credit scores and less access to higher education. Consequently, people in minority neighborhoods often pay more for insurance. This happens even when they have low accident rates in their neighborhoods.
Insurance trade groups argue that using income proxies is necessary as it helps prevent future losses. They claim that education and occupation are accurate predictors of insurance risk. These factors do not reflect how safely a person drives. Other evidence also suggests that certain cohorts of highly educated professionals are generally known to have higher accident rates than workers with less educational attainment across various industries.
One study highlighted this inequality by comparing two driver profiles from the same location. It revealed that a wealthy professional with a drunk driving record received lower rates than a waitress with a clean record. A wealthy professional is more likely to use a single insurance company across a variety of assets – auto, home, etc. – so receiving a lower rate on one type of coverage is the gateway for the insurance company. Such discrepancies exist when insurers prioritize a client’s overall profitability over their safety habits, eliciting the debate on whether a mandatory product should be priced based on corporate profit or public equity for all citizens.
Some federal lawmakers have proposed legislation to address these pricing disparities. The Prohibit Auto Insurance Discrimination Act, or PAID Act, H.R. 1270, would bar auto insurers from using income-based and other non-driving factors, including education, occupation, employment status, home ownership status, and credit score, when calculating rates or determining eligibility. If passed, the bill would empower the Federal Trade Commission to enforce those restrictions. This change would move auto insurance pricing closer to a driver’s actual record and driving behavior.
Several states have also banned the use of income proxies when setting insurance premiums. For example, California, Hawaii, and Michigan prohibit providers from using education and employment data when setting rates. These changes demonstrate that insurers can still thrive without relying on factors that unfairly disadvantage certain groups. Advocates for reform are hopeful that dropping these practices will go a long way toward putting affordable coverage within reach for drivers from all walks of life, no matter where they live in the country.
About Eric Poe
An entrepreneur from Princeton, New Jersey, Eric S. Poe, Esq., CPA, has led NJ PURE and CURE Auto Insurance. As CEO and chief marketing officer of CURE, he oversees business strategy, underwriting, claims, loss control, rate filings, re-insurance, and marketing decisions. He has testified before state and federal legislative committees on insurance industry topics and has received recognition from NJBIZ, ROI-NJ, the African American Chamber of Commerce of New Jersey, and the New Jersey Law Journal.
