Assemblywoman Annette Quijano speaks in support of a bill she sponsored that would forbid car insurance companies from basing rates on factors like education, occupation, and credit scores during a press conference at the Statehouse in Trenton on Dec. 5, 2022. (Dana DiFilippo | New Jersey Monitor)
With car insurance premiums set to rise Jan. 1 for more than a million drivers statewide, several lawmakers and advocates called on legislative leaders to move a stalled bill that would prohibit insurers from using factors like education, occupation, and credit scores to set rates.
That’s a widespread practice in New Jersey that results in higher premiums for those least likely to afford them — poor and minority drivers, critics say.
Insurance rates should be solely based on driving records, said Assemblywoman Annette Quijano, a prime sponsor on the bill.
“Unfortunately, certain car insurance companies use education, occupation, employment status, home ownership status, marital status, and credit scores as rating factors in automobile insurance underwriting,” Quijano said at a Monday morning news conference at the Statehouse. “These factors have nothing to do with a person’s driving record and only serve to create a two-tiered system that punishes poor and working-class New Jerseyans.”
The call to action came less than a month before a new law raising mandatory minimums for liability insurance takes effect, a controversial measure meant to strengthen protections for accident victims that critics warn instead will make insurance unaffordable for low-income drivers. Rates for about 1.1 million drivers in the lowest tiers of coverage are expected to rise about $125 under the new law.
Basic liability insurance is already out of reach for many drivers, said Chuck Bell, an advocate from Consumer Reports. He pointed to a 2017 study by the Federal Insurance Office, which found that 2.3 million people in New Jersey live in zip codes where they can’t afford basic liability coverage.
Penalizing drivers for things like poor credit scores makes insurance even more unaffordable, advocates agreed. That’s especially unfair when things people have little control over — like medical debt, childhood poverty, or job loss because an employer relocates — can damage their credit history, they said.
“Using factors that don’t correlate remotely to drivers’ road safety not only jacks up rates and decreases affordability for many residents across the state, but it’s also unmistakeably tied to structural racism,” said Nicole Rodriguez, president of progressive think tank New Jersey Policy Perspective.
Drivers with poor credit histories can pay almost three times as much in premiums as those with excellent credit, Bell said.
“These are basically multiple gut punches to the consumer,” Bell said.
Bell criticized the state Department of Banking and Insurance, saying it does not exercise its authority to ensure fair, nondiscriminatory rates. The department didn’t respond to a letter seeking regulatory action that advocates sent in April, Bell said. A department spokeswoman didn’t respond to a request for comment.
Under the Assembly version of the bill, insurers would be prohibited from considering education, occupation, and credit score in setting car insurance premiums. The Senate version adds home ownership status and marital status to that list of banned considerations.
Introduced in January, the bill hasn’t moved in either chamber. Lawmakers tried to get it passed in the last legislative session too, but while the Senate approved it, the bill failed to move at all in the Assembly.
Assemblyman Lou Greenwald (D-Camden), the chamber’s majority leader, told the New Jersey Monitor Monday that he wants to see the actuarial data the bill’s supporters cite, as well as an analysis of how the bill would impact consumer costs and the impact of such legislation in other states.
“I would say it’s not OK to use any factor to set someone’s rates in a way that discriminates against any group,” he said.
But he said he worries removing factors like occupation could raise rates for people like senior citizens and teachers, who can’t afford such hikes.
Greenwald led efforts a decade ago to reform auto insurance regulations in New Jersey, which he said made car insurance more affordable and reduced the number of uninsured drivers on Garden State roads.
“The question is: Are people being denied access to insurance because of this? And if you have the lowest uninsurance rates in the country, it seems to indicate that the answer is no,” Greenwald said. Only 3.1% of drivers are uninsured in New Jersey, the lowest rate nationally, according to the Insurance Information Institute.
Maura Collinsgru, director of policy and advocacy for New Jersey Citizen Action, said it’s not an issue of access.
“We’re not saying people can’t get insurance. We’re saying they’re overpaying for it,” she said.
Five states — California, Hawaii, Massachusetts, Nevada, and Washington — forbid insurers from using credit information in setting car insurance rates, according to Citizen Action. Seven states — California, Georgia, Hawaii, Massachusetts, Michigan, New York, and Vermont — prohibit insurers from considering education and occupation to determine premiums.
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