NEW YORK (CNNMoney) -- The car owners who are least able to afford high auto insurance rates are getting charged the most for coverage, according to a consumer watchdog group.

In a report released earlier this week, the Consumer Federation of America claimed that auto insurers are using pricing methods that put low- and moderate-income drivers at a disadvantage, frequently charging them much higher premiums than higher-income drivers.

The report, which took into account more than 100 auto insurance pricing studies including several of its own, claimed that insurers used factors, such as education, where a person lives and works, credit history and age to determine the amount they will charge. While it's illegal in all 50 states to base insurance rates on race or income level, the CFA claims these other factors are a backdoor way for insurers to determine a customer's income level.

The consumer group said it also found that low-income customers often paid more for less coverage.

"In some areas, many responsible lower-income drivers are required to spend more than $1000 a year for liability coverage that is often unfairly priced and provides no real insurance protection to them," said CFA Executive Director Stephen Brobeck.

Insurers deny there is any bias in their price assessments or that they are charging more to lower-income customers.

"Insurers use criteria that assess risk, period," said Robert Hartwig, chief economist and president of the Insurance Information Institute. "Your premium is based on how likely you are to get in an accident and how much that accident will cost."

Premiums are higher in inner-city neighborhoods because they tend to be more congested, increasing the odds of an accident -- not because the people that live in them are poorer, said Hartwig.

Yet, price comparisons from a Brookings Institution study of Allstate (ALL, Fortune 500), Geico (BRK-A), and Progressive (PGR, Fortune 500) policies sold in 12 metro areas in 2006 found large premium differences -- not only between different communities but even within the same area. Policies sold in lower-income neighborhoods were 8% to 94% more expensive, depending on the metropolitan area, than those offered in upper-middle class neighborhoods in the same urban areas.

Separately the CFA found that those with less education or those who worked in less skilled occupations would pay premiums that were, on average, 40% higher. The finding was based on documents revealing Geico's extensive use of education and occupation as the basis for insurance rates and eligibility that it filed with the New Jersey Department of Banking and Finance.

Arlene Lester, a spokeswoman for State Farm, said her company does not use occupation to assess risk but it does use credit reports. It looks at the driver's payment history, whether debtors have had to collect debt, and the number of credit cards and other accounts under a policyholder's name.

Geico and Progressive had not responded to requests for comment by press time.

The problem is that insurers don't share how they correlate factors, such as education and occupation, with claim risk, so it's difficult to assess whether they are valid, said Robert Hunter, director of insurance for the CFA.

In several states, including Arizona, Texas and Arkansas, the CFA found that insurers were charging low-to moderate-income customers more for minimal liability coverage policies than they were charging higher-income customers for standard liability policies that offered more coverage.

Hartwig of the Insurance Information Institute said that drivers who are charged more for minimum coverage typically have bad driving records. That's why their premiums are higher.

Overall, there is a high economic toll that higher auto insurance rates take on low-to-moderate income drivers, the CFA said. These households spent $700 to $1,000 a year on premiums, dwarfing many other expenditures, including even the cost of financing a car purchase. And since auto insurance is mandatory in every state except New Hampshire, most families need to purchase it in order to use a car to get to work or go grocery shopping.

Yet, Hartwig said the auto insurance market has become more consumer-friendly and affordable. He cited an industry study that showed insurance costs have declined for the five years through 2009, the last year data was available. He also noted that insurance coverage is widely available in every U.S. state and that competition has driven down prices.

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