WASHINGTON, D.C. — A proposed legislation would end the car insurance industry’s practice of setting higher rates based on income, credit score, education levels and other factors unrelated to driving history and ability.
U.S. Rep. Rashida Tlaib (D-Detroit) joined two of her colleagues to reintroduce the bill to ensure insurance companies only use driving-related factors in determining car insurance rates and eligibility.
The lawmakers say insurance companies use socioeconomic factors to raise rates for low-income individuals, non-homeowners and others who otherwise have good driving records.
Insurance companies use so-called income proxies to set automotive insurance rates, despite no evidence to indicate such factors identify risky drivers.
Use of these proxies results in higher rates charged to lower-income drivers while more affluent drivers see savings, costing working families billions of dollars each year. The PAID Act would ban companies from using characteristics like occupation, gender, credit score, etc. and will empower the Federal Trade Commission (FTC) to enforce these prohibitions.
Auto insurance discrimination on the basis of non-driving factors has allowed auto insurers to reap benefits off the financial struggles of too many Americans — U.S. Rep. Rashida Tlaib (D-Detroit)
Every state except New Hampshire and Virginia requires drivers to maintain car insurance. Last year a report showed Detroit and Dearborn to have the highest car insurance rates in the country.
“Auto insurance discrimination on the basis of non-driving factors has allowed auto insurers to reap benefits off the financial struggles of too many Americans — and the pandemic has exponentially exacerbated those financial struggles,” Tlaib said.
“High auto insurance rates continue to keep our residents in the cycle of poverty,” she added. “We are now one step closer to ending the predatory practice of auto insurers hiking rates and forcing folks to choose between paying their auto insurance, keeping a roof over their heads or food on the table through no fault of their own.”
In Michigan, an insurance law passed last year already bans insurers from using credit score, gender, marital status, occupation, education or homeownership to set rates. But insurers can still set rates using factors like age or driving record and other credit rating systems.