Auto Insurance Premiums Frequently enough Tied to Credit Scores, Raising Fairness Concerns
Washington, D.C. – Drivers with limited or poor credit histories are frequently enough paying significantly higher auto insurance premiums than those with good credit, a new NPR investigation reveals. Teh practise, permitted in most states, draws criticism from consumer advocates who argue it unfairly penalizes individuals who may have legitimate reasons for lacking extensive credit records or experiencing financial hardship.
The NPR analysis, utilizing data from Quadrant details Services, demonstrates a consistent pattern: insurers frequently incorporate credit-based insurance scores into their rate calculations. This means a driver with a low credit score could face substantially higher premiums, even with a clean driving record. The investigation comes as some states are challenging the legality of the practice, citing potential discriminatory impacts.
“When the industry talks about a correlation between increased claims and low credit scores, that is a true statement,” Washington state Insurance Commissioner Patty Kuderer stated, “But that’s not really addressing the issue of what I, as the insurance commissioner, am statutorily charged with doing, which is looking to see if the rates are unfairly discriminatory.”
The practice hinges on the insurance industry’s assertion that credit scores correlate with the likelihood of filing a claim. Though, critics argue this correlation doesn’t justify penalizing drivers for factors outside their control. Alexis blake, featured in the NPR report, found herself facing higher premiums despite being a responsible driver, and was unable to determine precisely how her credit history impacted her rates.
Currently, the use of credit scores in insurance pricing is banned in California, Hawaii, Massachusetts, and Michigan. In Washington state, a similar ban was overturned in court, but Insurance Commissioner Kuderer has indicated a desire to revisit the issue and has called for a formal study.
NPR’s analysis utilized data analyzing insurance companies’ regulatory filings to estimate premiums based on risk assessment,including credit history. The data included estimates from multiple insurers and ZIP Codes, though it acknowledges limitations, including the proprietary nature of rate-filing models and incomplete data for some companies in Florida, new York, South Carolina, and Wyoming (GEICO, USAA, and Progressive). Quadrant’s data is widely used by insurers and researchers to understand market trends.
