Consumer Reports calls on New Jersey lawmakers to ban discriminatory auto insurance pricing based on credit Scores, education, and occupation
TRENTON, NJ – A new law (S 481/A4291) signed by New Jersey Governor Phil Murphy today that raises minimum liability limits for basic auto insurance will make coverage even more unaffordable for drivers who are unfairly charged higher rates based on their credit scores, level of education, and occupation, according to Consumer Reports. CR and other consumer groups had urged the Governor to veto the bill unless state lawmakers passed legislation to ban the unfair auto insurance industry practice that disproportionately harms low income drivers and communities of color.
“Millions of New Jersey residents already have a tough time paying for the auto coverage they need because insurance companies charge them higher rates based on their credit history, level of education, and occupation,” said Chuck Bell, advocacy programs director for Consumer Reports. “It’s simply unfair to require New Jersey drivers to pay more for basic liability coverage without addressing this fundamentally unfair insurance industry practice.”
Bell continued, “No one should have to pay more auto coverage just because they have less than perfect credit, didn’t go to college or have a lower paying job. Governor Murphy should work with state lawmakers to prohibit insurers from charging more for coverage based on factors like credit history, education and occupation that have nothing to do with someone’s driving record.”
People without a college degree are more likely to work in service-industry or blue-collar jobs, so insurance pricing that considers both education and career can hit the same person twice for essentially the same circumstances. Then, if they earn less money and have a harder time paying their bills, they may have lower credit scores—another factor that can make for higher premiums. Add it all together, and a person may get penalized over and over again for basically the same reason.
Pricing auto insurance based on these non-driving factors is particularly troublesome since it magnifies the economic impacts of systemic racism. Because of discrimination and economic disparities, people of color have historically had less access to adequately funded primary and secondary schools, higher education, and employment opportunities, leading to highly unequal outcomes in education and the labor market. In the U.S., these factors remain closely tied to race, which cannot legally be considered by insurance companies in calculating insurance prices.
Auto insurance coverage is already unaffordable for an estimated 2.3 million New Jerseyans (or one out of four residents) who live in low- and moderate-income ZIP codes and ZIP codes where most residents are people of color, according to a 2017 Federal Insurance Office analysis. A Consumer Federation of America analysis of insurance industry data found that drivers in majority Black and Latino ZIP codes pay approximately $1,000 more per year for insurance than drivers in majority white ZIP codes.
Michael McCauley, michael.mccauley@consumer.org, 415-902-9537