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Consumer Alert: Auto Insurance Widow's Penalty

 
Recently, you may have heard about or read news articles about a “widow’s penalty” in auto insurance referencing cases where individuals saw a significant increase in their auto insurance premium after losing a spouse. Governor Wolf and Commissioner Miller are strongly committed to consumer education and consumer protections, so the commissioner would like to explain what has been happening and outline what the Pennsylvania Insurance Department plans to do about it.
 
What is the “widow’s penalty”?
 
Automobile insurance companies are allowed to charge different prices to different groups if they have data showing that one group is higher risk than the other. For example, you probably know that inexperienced teenage drivers pay more than more experienced adults, and drivers with multiple accidents on their records pay more than those who have none. These cost differences exist because there is statistical evidence showing a difference in risk between the two groups.
 
Some insurance companies have been able to show through statistical evidence that single drivers are more risky (or incur higher claims costs on average) than married drivers and therefore charge single drivers more. Some of the companies that use this rating factor have included widows and widowers in the single group, resulting in premium increases following the loss of a spouse.
 
Commissioner Miller recognizes that someone becoming a single driver due to the loss of a spouse is a different circumstance than when someone is a young, single driver who has never been married. Raising auto insurance premiums in this situation is what the commissioner and many other people find unfair. Therefore, we have established a policy calling for a review of insurance company rate filings that propose to charge a widow or widower a higher rate solely based on the change in marital status.  If the insurance company cannot provide statistical support for including widows and widowers in the higher single rate, we will not approve the rate change and will require the insurer to continue to use the lower rate. 
 
There are two more things consumers should know. First, while we will not allow unjustified rate increases for widows and widowers going forward, you may have a policy that was previously approved using this type of rating. Only some insurance companies have used this type of rating factor, so if you experience a premium increase due to the loss of a spouse, Commissioner Miller encourages you to take advantage of Pennsylvania’s competitive auto insurance market and shop for other options. A cheaper plan may be available to you.
 
Second, rating differences due to marital status are not the only reason auto premiums can change following the loss of a spouse. When a couple is on a policy, their driving records are considered together when determining the premium. If one spouse dies, the premium will change to reflect the risk of the driver remaining on the policy. If that driver has a better driving record than their spouse the premium may go down, but the premium could go up if that driver has a worse driving record with more accident claims filed in the past. Additionally, many companies offer discounts for families combining multiple types of policies, such as a life and auto policy. If one of those policies goes away, like a life policy paid out after the loss of a spouse, that discount may go away as well.
 
If you have questions about why your auto premium is changing, call your insurance company. If you have questions about whether your insurance company is complying with Pennsylvania law and regulation, please contact the Insurance Department at 1-877-881-6388. If you have questions about auto insurance or any other type of coverage, click on “Consumers” or call 1-877-881-6388. We are here to help you.