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New Jersey Senate votes to ban auto insurers from using drivers’ credit scores, education, and occupation to set premiums

Consumer Reports calls on Assembly lawmakers to end unfair insurance industry practice 

TRENTON, NJ – Consumer Reports praised the New Jersey Senate today for passing legislation that aims to end an unfair auto insurance industry practice that could make coverage more costly for some consumers even though they may have clean driving records.  The Senate passed S. 111, which prohibits insurers from using a driver’s credit score, occupation and education to price auto coverage. The Fair Auto Insurance Rates (FAIR) Act is supported by CR and a coalition of consumer, community, and economic justice organizations.

“It is fundamentally unfair for auto insurers to penalize consumers with higher premiums based on factors that have nothing to do with their driving record,” said Chuck Bell, Programs Director for Advocacy for Consumer Reports. “Pricing auto insurance based on non-driving factors like credit scores, education and occupation is particularly troublesome since it magnifies the economic impacts of systemic racism. This bill will help ensure that auto insurance is priced fairly in New Jersey so that drivers will be able to afford the coverage they need.”

The Senate took action on the same day that CR released its investigation that 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 or job titles 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 also 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 revealed 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.

Four states—California, Massachusetts, New York, and Michigan—currently prohibit the use of education and job level in auto insurance pricing.  California, Hawaii, Massachusetts, and Michigan have banned the use of various types of credit information for auto insurance pricing.

Contact: Michael McCauley, michael.mccauley@consumer.org, 415-902-9537