Don’t Use Credit, Jobs To Decide Car Insurance Rates, NJ Advocates Say

NEW JERSEY — Many New Jersey residents are being “significantly” overcharged for car insurance, even when they have good driving records – but a proposed state law would help turn that around, advocates say.

Earlier this month, a group of Democratic lawmakers and advocates gathered to push for a bill that would prohibit the use of credit scores, occupation and education level when determining a driver’s auto insurance rate in New Jersey. Watch the video below.

The bill would also ban the use of homeownership, marital and employment status for the same.

Primary sponsors for the Senate version of the bill, S-357, include Nia Gill, Teresa Ruiz, Nilsa Cruz-Perez and Nellie Pou. The bill was referred to the Senate Commerce Committee in January.

Primary sponsors for the Assembly version of the bill, A-1674, include Annette Quijano, Wayne DeAngelo and Verlina Reynolds-Jackson. The bill was referred to Assembly Financial Institutions and Insurance Committee in January.

“People of color and low-income drivers are currently being overcharged significantly even when they have good or perfect driving records because New Jersey allows insurers to use these factors,” nonprofit advocacy group New Jersey Citizen Action said, supporting the proposed law.

Other sources have made similar claims.

A 2015 nationwide study by the Consumer Federation of America found that predominantly African-American neighborhoods pay an average of 70 percent more for premiums than other areas do. And a 2019 study by Consumer Watchdog in California claimed that insurance companies are charging higher premiums to drivers who live in ZIP codes with lower per capita incomes, lower levels of educational attainment or which are “communities of color.”

“It has long been observed that the same safe driver in a predominantly minority zip code is often charged higher auto insurance premiums than if he or she lived in a non-minority neighborhood,” a ProPublica analysis done in 2017 stated.

According to Experian, many auto insurance companies use credit-based insurance scores to help them decide whom to offer insurance to and how much to charge.

“These are different from credit scores used for lending purposes, and studies have shown they correlate with the likelihood of consumers filing insurance claims,” Experian states on its website. “When these scores are used, they are only one of many factors that can influence your insurance options and rates.”

If the proposed law passes, New Jersey wouldn’t be the only state to ban the use of credit scores in this way, Experian notes. States including California, Hawaii, Washington, Massachusetts and Michigan currently have similar legislation on the books.

Insurance companies also use a driver’s occupation to try and predict the possibility of claims being submitted, according to WalletHub.

“Some of the highest-risk occupations for car insurance are doctor, lawyer and chef because of their long, irregular hours and high stress levels,” the financial information website states. “Other jobs, like driving for Uber or Lyft, also are high-risk because they revolve around being in the car all day, which increases the likelihood of an accident.”

Send news tips and correction requests to eric.kiefer@patch.com. Learn more about advertising on Patch here. Find out how to post announcements or events to your local Patch site.