Bill prohibits insurers from using credit scores and other socioeconomic factors to set premiums
WASHINGTON, D.C. – Consumer Reports urged Congress to pass legislation introduced today by Representative Bonnie Watson Coleman that would bar auto insurers from using a driver’s credit score, education, occupation and other socioeconomic factors to set premiums. The Prohibit Auto Insurance Discrimination (PAID) Act aims to end an insurance industry practice that disproportionately harms Black and Latino drivers with higher premiums.
“Auto insurers shouldn’t be allowed to charge higher premiums just because someone hasn’t graduated from college or has a lower paying job or less than stellar credit score,” said Chuck Bell, Programs Director for Advocacy for Consumer Reports. “These socioeconomic factors and others like them have nothing to do with a person’s driving record and reinforce systemic racism. This bill will help ensure that auto insurance is priced fairly so drivers can afford the coverage they need.”
Insurance companies routinely consider both driving and non-driving related factors when pricing automobile insurance policies. Under the PAID Act, auto insurers would be prohibited from using a number of non-driving factors in insurance rating or underwriting decisions: education, occupation, employment status, credit scores, previous insurance information, zip codes, census tracts, or homeownership status.
A Consumer Reports investigation released in January found that drivers with less education and lower paying jobs could end up paying more for auto insurance compared to consumers with identical driving records who have advanced degrees and jobs title that come with higher pay. CR found that Geico, Progressive, and Liberty Mutual quoted higher premiums, on average, to consumers who had completed less education. Geico and Progressive quoted higher prices to consumers with service jobs compared to managers and executives.
In 2015, Consumer Reports found that socioeconomic factors sometimes weigh more heavily than driving details in the premiums insurers set. CR’s investigation found that a poor credit score could add $500 to $2,000 or more to a driver’s annual premium compared with a consumer who had the same driving record and excellent credit.
Pricing auto insurance based on non-driving factors like education and occupation is particularly troublesome since it magnifies the economic impacts of systemic racism. In the U.S., these factors remain closely tied to race, which cannot legally be considered by insurance companies in calculating insurance prices.
Michael McCauley, email@example.com or 415-902-9537