Living in the wrong ZIP code — even a short distance from a boundary — could mean a difference of hundreds of dollars in your automobile insurance rates, a new analysis found.

The Consumer Federation of America, a nonprofit advocacy group, tested annual auto premiums from six big insurers in 10 cities. The tests found that good drivers from homes that are near each other — in some cases less than 100 yards apart or even right next door — yet in different ZIP codes are often quoted disparate rates.

With other factors being equal, addresses in less-affluent ZIP codes with higher minority populations were quoted annual premiums that were $410 higher, on average, than those in neighboring ZIP codes with wealthier, more heavily white populations, according to the analysis. 

The report included photographs of the homes tested, like two in Buffalo, N.Y., where the average cost was $1,697 a year on one side of the line and $2,315 on the other.

In every city tested, at least one insurer charged $200 more for the same coverage for someone living on the “wrong side” of a ZIP code line, researchers found.

“Jacking up rates for living on the wrong side of the street is arbitrary and unfair,” said Douglas Heller, an insurance consultant who conducted the analysis with a federation researcher. (While the report used specific addresses in its research, Heller said, it did not seek actual insurance premium information from people living at those addresses, because of privacy concerns.)

Not all insurers quoted higher rates in every instance. In all but one of the cities, at least one insurer charged a driver in the poorer ZIP code the same or a slightly lower premium. (The exception was Detroit, where just two companies would provide online quotes.) In Atlanta, for instance, Allstate charged 2 percent less in the lower-income ZIP code.

‘Territorial rating’

Insurers argue that dozens of factors affect a driver’s premium, including the driver’s address, because it indicates where the car is most often driven.

The Property Casualty Insurers Association of America, an industry group, said in an e-mailed statement that “territorial rating” was a well-established practice and that it was “indisputable” that insurance losses and expenses were higher in some areas than others, because of factors such as weather, congestion, legal costs and road quality.

The association dismissed the federation’s suggestion that racial or income bias occurred in setting premiums, noting that state laws ban such bias and adding that insurers “fully comply with the laws of each state.”

Similarly, Michael Barry, a spokesman for the Insurance Information Institute, said auto insurance pricing was “colorblind.”

The consumer federation said its findings reflected broader industry practices in assigning premiums, such as taking into account socioeconomic factors such as a driver’s job title, education level, homeownership status and credit history. The federation opposes the use of such factors, rather than a person’s driving record and miles driven.

When addresses may or may not matter

The federation sent a letter to all state insurance commissioners, asking them to consider its findings.

The letter, signed by J. Robert Hunter, the federation’s director of insurance, said the federation wasn’t “entirely” opposed to using ZIP codes. He said there might be “actuarially sound” differences in risk between a driver who commutes through dense urban areas and one who goes through less populated areas.

But, Hunter argued, drivers living in adjacent ZIP codes generally “should not see much, if any, change in premium.” He added that it was the duty of regulators to prevent border price differences like those found in its report.

The National Association of Insurance Commissioners declined to comment on the report. A spokeswoman said in an e-mail that the association’s auto insurance working group was examining “similar” issues. (Consumer advocates have criticized the working group, saying its data collection lacks rigor.)

For its analysis, the federation compared rates for hypothetical good drivers, with the same characteristics but different addresses, in Atlanta; Austin, Texas; Buffalo; Columbus, Ohio; Denver; Detroit; Minneapolis; Philadelphia; Tampa, Fla.; and Trenton, N.J.

Researchers sought online quotes for basic coverage from Allstate, Farmers, Geico, Liberty Mutual, Nationwide and Progressive. (State Farm’s website didn’t allow researchers to retrieve enough information to be used in the report, the federation said.)

Rates across ZIP code lines increased the most for Farmers, with average changes of 31 percent, and Allstate, with 28 percent. Farmers and Allstate referred inquiries to Barry, who said, “Where you drive is strongly linked to the likelihood that you’ll get into an accident.”

Liberty Mutual’s rates “did not vary much” between adjacent ZIP codes, with the exception of quotes in Columbus and Detroit, the analysis found.

Ann Carrns writes for the New York Times.