(ARA) - Studies have shown that certain groups may be offered pricier car insurance quotes than other groups. For instance, African American policyholders pay more than other groups for their coverage. Auto insurance companies are also known for charging higher rates to individuals with lower incomes.

One reason given for these increases in premiums is that poorer consumers often have lower credit scores, which are used to determine auto insurance rates. Companies frequently associate lower credit scores with a higher risk of filing a claim. However, because the groups have been targeted by default as a result, companies have received criticism for discriminatory practices.

How companies determine auto insurance rates

For some time, auto insurance companies have been very reluctant to reveal how they calculate auto insurance rates. It's only been through reverse analysis that researchers and policyholders have been able to gain some idea of what goes into determining an auto insurance premium.

The general consensus is that some of the following factors are used to determine rates:

* Age
* Driving history
* Location of residence
* Car safety rating
* Vehicle type and year
* Credit history
* Employment
* Level of education

While no one is 100 percent certain that all companies use these factors (some may use more or less), you can assume that most play a role in determining auto insurance rates.

The problem with this list is that some of the items have nothing to do with driving history and more to do with outside factors. In other words, because some of the factors are tied to issues that aren't always easily resolvable (location of residence, credit history, employment, level of education), some believe that using them is indeed setting up the possibility of discriminating against certain groups, including poorer policyholders.

What about the "poor" who were affected by the financial crisis?

What's interesting about the model that auto insurance companies have decided on is that an FTC report determined there is no known correlation between low credit scores and a higher likelihood of getting into a car accident.

However, the use of credit scoring and other outside factors is affecting those who need breaks in their auto insurance premiums the most.

Since the financial crisis started in 2008, millions of people have lost their jobs, filed for bankruptcy, lost their homes and now have lower credit scores. Are they now among the population that is viewed as a driving risk even if they have always had a stellar driving record?

At what point do companies draw the line and determine that outside situations should no longer influence rates? Clearly, this is a flaw that has long needed to be examined.

Solutions for those being charged more

People being charged more based on location or credit scoring has been a hot topic in the media for some time. However, most states allow companies to determine rates in this way, which means it is up to consumers to find ways to lower auto insurance costs.

If you are among the "poor" or are being charged higher auto insurance rates for other reasons, you may be able to find lower rates. Comparison shopping for car insurance is a proven method of lowering auto insurance premiums. Also, you could consider low-cost auto insurance like programs found in California. And then there are pay-as-you-drive (PAYD) programs like Progressive's MyRate.

By getting out there and conducting your own comparison for the best auto insurance available, you could have a shot at finding a company that will charge you a reasonable rate no matter where you live, your educational level or your credit score.

Courtesy of ARAcontent