NJ must ban car insurance companies from using credit scores to set rates, advocates say
While the New Jersey Legislative Assembly is consider an invoice that would prohibit factors unrelated to the conduct of auto insurance determinations, Koubiadis said the Department of Banking and Insurance has the authority to change its regulations on its own.
A Department of Banking and Insurance spokeswoman said the agency was not commenting on the pending legislation.
Who pays more?
Michael DeLong, research associate for the Consumers Federation of Americaconsumer advocate, said it looked at data from New Jersey’s 10 largest auto insurance companies and found that consumers with poor credit scores pay an average of $1,300 more a year in their premiums – or 156% – than drivers with good credit ratings.
“A lot of people have poor credit due to circumstances beyond their control. You could have bad credit because you grew up in a low-income family and didn’t have access to credit cards. or other financial instruments, you could also have bad credit because you went through a medical crisis and were bankrupt,” DeLong told Gothamist.
Statewide, consumers with excellent credit scores and perfect driving records pay an average annual premium of $842; those with fair credit pay an average of $1,384. And those with bad credit pay an average of $2,153, according to data acquired by the Consumer Federation of America from Quadrant Information Services.
“It’s really unfair because it ends up being a tax on low-income people. They end up paying more, even though they usually have less,” DeLong said.
The data also shows that New Jersey drivers living in predominantly Black or Latino ZIP codes pay roughly 50% higher premiums than motorists residing in predominantly White ZIP codes. Delong said black and Latino residents on average tend to have lower credit scores, lower levels of education and lower-paying jobs due to systemic discrimination.
Widens the wealth gap
Basing car insurance policies on those same factors only exacerbates the wealth gap, proponents say.
“The predatory practice of charging black and brown drivers higher rates based on factors unrelated to their driving record is unjustifiable,” Nicole Rodriguez, research director for New Jersey Policy Perspective, said Monday. at a rally outside Trenton.
DeLong said insurance companies have failed to demonstrate how these non-driving factors relate to driving risk.
“They are not what your driving records should be based on. They have little or no connection to whether you are a safe driver,” he said.
New Brunswick resident Tony Scimone said his auto insurance increased by more than $3,000 a year and his monthly payments went from $80 to $374 after buying a new car. He said it was because of his credit rating.
“My credit score has nothing to do with my driving ability, my record or my risk,” he said at the Trenton press conference. “My driving record is excellent, why should my or someone else’s credit history be used to charge us so much more?”