Income Inequality in Chicago Extends to Auto Insurance Costs

In Chicago, residents with low incomes pay more for car insurance than affluent ones. In areas with median incomes of $20,000 or less per year, Chicagoans pay on average 16% more for their car insurance than ones from areas making over $100,000 per year. As well, in areas with high unemployment or a low number of skilled workers, residents pay a disproportionate amount for car insurance.

Chicago consists of 55 neighborhoods where incomes ranges from $19,000 per year to over $150,000 per year. Using a 30 year old male driver as our control, we obtained quotes from 14 auto insurance companies in each zip code. The graph below compares the median income to the average premium price for each neighborhood. As you can see, the poorer the neighborhood, the more it tends to pay for car insurance.

Graph shows the correlation between median income and car insurance cost in Chicago

The ten lowest earning neighborhoods in Chicago pay an average 13% more per year than the ten highest earning zip codes. The largest discrepancy however, is between drivers making over $100,000 and less than $20,000 where the cost difference is 16%. Overall, our sample driver paid an average of $1,229 per year in neighborhoods with a median income under $69,000, while paying an average of $1,276 per year in neighborhoods with incomes under $30,000.

The map of Chicago also reveals interesting points about this trend. There is only one generalized area where premiums are low--Central and North Side Chicago. City centers tend to get the most traffic, meaning auto insurance tends to be higher. That was not the case for these high-income Chicago neighborhoods however. The lowest earning neighborhoods and the highest paying come from Chicago's Southside and Southwest Side.

Map of Chicago Showing Correlation Between Income and Auto Insurance costs

Furthermore, not only do low income residents pay more for car insurance, it has a greater toll on their total expenses. On average, 5% of a low income resident’s paycheck is used to pay their car insurance bill compared to 1% or less for a high income resident.

Income Level

Average PremiumPremium Payment as Percentage of Income

$19,000 to $33,000

$1,2625%

$30,001 to $41,000

$1,2243%

$41,001 to $58,000

$1,2003%

$58,001 to $76,000

$1,1662%

$76,001+

$1,1291%

Our findings also makes a significant assumption: that the profile driver from the low and high income areas has the same credit. Credit score is another well-known non-driving factor that influences auto insurance premiums. A driver with excellent credit (720+) can pay nearly half as much as someone with poor credit (-500). Under the assumption lower income residents have more credit issues than higher income residents, the disparity between premiums will probably be even greater realistically.

Areas With High Unemployment and a Low Number of Skilled Workers Have Higher Auto Insurance Costs

Chicago has neighborhoods with less than 1% employment as well as neighborhoods with nearly 20% unemployment. In the ten neighborhoods with the highest level of unemployment, drivers pay 19% more than in the ten neighborhoods with the lowest levels of unemployment.

Graph shows the correlation between unemployment and car insurance cost in Chicago
For our sample driver, the average premium for a neighborhood with less than 5% unemployment was $1,109 while the average premium for neighborhoods with higher than 15% unemployment was $1,314.

Unemployment

Average Premium Cost For Sample Driver

0 to 5%

$1,109

6 to 10%

$1,200

11 to 15%

$1,241

15% +

$1,314

A high prevalence of, as the ACS census survey defines as, “professional, scientific, and management, and administrative and waste management services” workers is also correlative to the premium cost of an area. Price tends to decrease as the number of professionals in an area go up and number of less skilled professions go down. In neighborhoods where manufacturing jobs outnumber professional jobs, for example, drivers pay 11% more.

Graph shows the correlation between profession and car insurance cost in Chicago

Between the three economic factors explored--income, unemployment and profession--the average R-squared value was 43% against average auto insurance premium. It is not a perfect correlation, but is enough to wonder why factors unrelated to how well a person drives or how likely they are to get into an accident have some sort of relationship to how much they pay for auto insurance. The relationship is more curious when compared to how well driving-related factors correlate to costs.

Driving Factors Are Weaker Correlates Than Economic Ones

The more a person drives, the more likely they are to get into an accident, thus the more they need to pay for auto insurance. By that logic, a community that drives more will most likely get into more total accidents, meaning they need to pay higher premiums as a community. Two measures of driving frequency however--mean commute time and percent of population who commutes by car-- both correlate weaker than the economic factors we have explored thus far.

Graph shows how driving factors are weaker correlates to auto insurance costs than economic ones

The two factors do correlate with auto insurance costs-- just not as well as the economic factors we have explored. The 10 neighborhoods with the largest and smallest commuting populations only differ by 7% in price compared 13%, 19% and 11% for income, unemployment and number of skilled workers respectively.

Black Neighborhoods are Disproportionately Affected

In Chicago, the ethnic makeup of a neighborhood is not a strong indicator of car insurance costs in of itself. That being said though, the ethnic makeup of a neighborhood does correlate with the economic factors we have explored , and as a result, neighborhoods with large black populations tend to pay more for car insurance than ones with large white populations.

In the five neighborhoods with the highest premiums, black residents make up an average of 89% of the population. In contrast, the five least expensive neighborhoods only have an average black population of 12%. Overall, of the 25 least expensive neighborhoods, only two are majority black. Interestingly, Hispanic neighborhoods show no correlation to insurance premiums. Neighborhoods with both high and low Hispanic populations fall on both ends of the cost spectrum.

Graph showing how black neighborhoods in chicago pay more for car insurance

Ranking of Neighborhoods from Most Expensive Premium to Least Expensive

The table below contains the data across all evaluated factors from each neighborhood in Chicago. They are sorted in order of most expensive car insurance costs to the least expensive.

Zip CodeIncomeUnemploymentProfessionalsCommutersCommute TimeWhite PopBlack Pop.Premium

60636

$27,08019%12%50%41 min3%95%$1,323

60621

$19,19018%9%45%402%97%$1,304

60651

$32,49411%10%58%3712%65%$1,301

60644

$26,29913%11%50%393%95%$1,296

60649

$27,72313%11%50%393%95%$1,287

60624

$22,83510%11%49%363%95%$1,282

60641

$48,7868%13%58%3666%4%$1,274

60652

$63,9059%9%71%3531%49%$1,266

60628

$37,03814%11%59%414%95%$1,266

60659

$50,2377%8%61%3255%8%$1,263

60629

$40,09511%11%63%3636%23%$1,258

60623

$29,07510%12%48%3549%34%$1,255

60643

$60,3159%11%66%3625%75%$1,250

60660

$40,8357%14%34%3668%17%$1,247

60632

$38,19610%12%58%3560%2%$1,245

60637

$26,99712%10%40%3318%79%$1,242

60619

$34,15314%11%55%402%99%$1,233

60634

$55,3247%11%74%3681%2%$1,232

60609

$32,37914%11%54%3249%27%$1,231

60615

$40,1969%14%37%3128%61%$1,229

60639

$38,68610%9%60%3634%16%$1,229

60646

$72,0865%13%72%3186%1%$1,225

60630

$62,8597%12%63%3576%2%$1,225

60612

$34,61411%14%47%3029%62%$1,219

60653

$25,34314%13%51%346%93%$1,216

60647

$54,4006%17%47%3079%8%$1,215

60645

$48,8777%10%57%3362%18%$1,215

60661

$92,5215%28%25%2766%7%$1,214

60655

$86,5986%8%81%3389%8%$1,205

60633

$43,4528%7%72%3070%26%$1,203

60616

$43,5548%12%44%2831%27%$1,199

60631

$74,1864%11%76%3294%2%$1,192

60608

$35,1129%12%46%3148%19%$1,187

60638

$62,9277%12%73%3478%4%$1,186

60626

$37,1096%13%34%3662%27%$1,180

60617

$38,82512%9%63%3737%55%$1,173

60654

$92,1067%33%26%2479%5%$1,161

60656

$55,8316%12%77%3088%1%$1,161

60625

$57,2527%15%46%3664%5%$1,155

60622

$71,0196%22%42%3077%9%$1,151

60657

$78,7963%28%30%3389%4%$1,149

60618

$56,7636%15%54%3383%3%$1,143

60620

$32,55714%10%53%402%98%$1,143

60640

$46,4237%18%33%3766%20%$1,142

60606

$107,8191%40%22%3083%3%$1,137

60604

$155,7506%33%25%2681%3%$1,134

60603

$111,1252%26%21%2266%1%$1,131

60607

$81,0425%23%39%2864%16%$1,126

60602

$73,9710%46%14%1582%2%$1,111

60601

$101,2504%22%24%2372%10%$1,098

60613

$69,0325%26%35%3585%8%$1,092

60610

$75,7005%25%26%2775%18%$1,088

60614

$88,2564%31%35%3089%4%$1,085

60611

$85,0745%28%27%2578%5%$1,079

60642

$70,1887%22%41%2876%10%$1,042

60605

$82,7774%20%34%3061%21%$1,033

Methodology

Chicago is a large city of over 2.5 million people with a high degree of income inequality making it ideal for this study. We obtained all 55 Chicago zip codes from the 2014 American Community Survey located on census.gov.

We then acquired auto insurance quotes from 14 auto insurance companies in all 55 zip codes. We used a sample driver as a control: the parameters were set so he was always a male of 30 years, single, with fair credit and drove a 2013 Toyota Camry. The only factor to change was the zip code in which he lived. Our driver opted for a basic policy consisting of just 25k/50k/25k bodily injury and property damage liability insurance, plus 25k/50k/25k in 'Uninsured Motorist' bodily injury and property damage liability insurance.

Data for median income, unemployment rate, profession rate, mean commute time, commuter rate, and black and white population percentages was collected from the ACS 2014 survey.

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