Bill Would Prohibit Auto Insurers From Setting Rates Based on Credit Scores

Legislative Gazette photo by Rikun Zhu

On Wednesday April 26, New York lawmakers and consumer advocates called for legislation to end auto insurance pricing discrimination.

According to a report released by the Consumer Federation of America, New York drivers pay substantial insurance premium penalties if they have fair or poor credit scores. Bill A.00843, introduced by Assembly Majority Leader Crystal Peoples-Stakes D-Buffalo, prohibits auto insurers from discrimination on the basis of socioeconomic factors in determining algorithms used to construct actuarial tables, coverage terms, premiums or rates.

CFA’s Director of Insurance Douglas Heller says that New Yorkers with poor credit are charged almost three times as much for auto insurance as residents with excellent credit, even if they have the same driving history. “State law requires every driver to buy auto insurance, so the Legislature and governor have a special obligation to ensure that pricing is fair and reasonable and they should take action to address the unfairness of credit-based premium hikes for good drivers.”

The report also revealed that average premiums are already much higher in New York’s communities of color due to the ZIP code pricing that auto insurance companies use.

“Using socioeconomic and non-driving factors that are not inherently related to a person’s ability to operate a car safely forces good drivers who are of lower socioeconomic status to pay more for our state’s obligatory auto insurance,” said Assembly Majority Leader Crystal Peoples-Stokes. “I am deeply concerned that the use of credit history is having a highly negative impact on low and moderate income drivers, especially Black and Latino drivers who live in neighborhoods where auto insurance is already very expensive.”

New York law currently allows insurance companies to incorporate consumer credit history into insurance pricing, it prohibits insurers from unfairly discriminating against any customer. Back in 2017, the New York Department of Financial Services adopted rules which were known as the “Green Light Law.”  This was aimed at preventing unfair discrimination by insurers that sought to vary auto insurance premiums based on drivers’ level of education or their occupation.

“Auto insurance is already extremely costly in many low and moderate income neighborhoods and communities of color, and the use of credit scoring is making it worse,” said David R. Jones, president and CEO of the Community Service Society. “We strongly support bill A.00843 which will ban the use of credit history and other socioeconomic factors like gender and housing status for auto insurance pricing.”