Advocates Urge NJ Department of Banking and Insurance to End Racist Practices in Setting Auto Insurance Rates

TRENTON (May 16, 2022) — The Coalition to End Unfair Car Insurance Practices, which includes consumer, anti-poverty, racial justice, and immigration advocates, today called on the state Department of Banking and Insurance (DOBI) to prohibit auto insurers from using credit information, education, and occupation in setting auto insurance rates for New Jersey drivers. Using these non-driving factors to determine premiums perpetuates systemic racism, as drivers of color are less likely to have graduated from college, more likely to work lower-paying jobs, and on average have lower credit scores. 

“We have urged the New Jersey Department of Banking and Insurance to take immediate regulatory action to end practices that reinforce systemic racism and add to the financial insecurities of so many New Jerseyans,” said Renee Koubiadis, Anti-Poverty Program Director of New Jersey Citizen Action. “These practices were allowed in our state after the auto insurance reform of 2003 and DOBI has the authority to prohibit these harmful practices now. Auto insurance companies have profited for far too long by overcharging people of color and low-income people in our communities. New Jersey should follow the example of states like New York, who have sharply curtailed these business practices.”  

”Fair Share Housing Center is committed to addressing any barrier that stands in the way of housing opportunities,” said James Willliams, Director of Racial Justice Policy, Fair Share Housing Center. “This is a chance to address a kitchen table issue. Discrimination in auto insurance keeps dollars out of families’ pockets, particularly people of color. This in turn leads to failed chances to save money and create generational wealth through homeownership.”

“These underwriting and rating policies disproportionately harm people of color and immigrant communities,” said Laura Bustamante, Policy and Campaign Manager, New Jersey Alliance for Immigrant Justice. “These include many New Jerseyans working in lower-paying jobs who struggle with economic insecurity. It’s not enough to ensure that immigrants can obtain driver licenses–we also need to ensure they aren’t overcharged for auto insurance. We urge our New Jersey regulators to reverse decades of unjust policies that keep countless drivers from the economic justice they deserve. 

Studies show that New Jersey consumers pay different auto insurance premiums based largely on the demographics of the ZIP codes where they live. Drivers in majority Black or Latino ZIP codes generally pay nearly 50 percent higher premiums than majority-white ZIP codes. These rates have nothing to do with driving records. An analysis by Consumer Reports based on price quotes from every New Jersey ZIP Code [http://found%20that%20a%20good%20driver%20with%20poor%20credi/]found that a good driver with poor credit would actually be charged $37 more than a convicted drunk driver with good credit. 

In New Jersey, Geico and Progressive are among insurers that charge African-American and Latino drivers with perfect driving records higher premiums than white drivers with blemished driving records who are better off socio-economically. 

“Most consumers don’t even know that auto insurers use their credit scores, education levels, and jobs to charge them higher premiums,” said Michael DeLong, a Research and Advocacy Associate with Consumer Federation of America. “We found that people with poor credit scores pay over $1,300 more on average for auto insurance! That is not just.”

“The predatory practice of charging Black and brown drivers higher rates based on factors having nothing to do with their driving records is unjustifiable,” said Nicole Rodriguez, Research Director for New Jersey Policy Perspective. Racial discrimination in this state by anyone, for any reason, must not be tolerated — let alone rewarded. We need to reform auto insurance pricing now to increase equity, access, and affordability for all.”  

 “At least seven other states have now banned the use of education level and occupation for auto insurance pricing, because these factors are potentially unfair to low and moderate-income drivers, and drivers of color,” said Chuck Bell, programs director for Consumer Reports. “It makes no sense that large insurance companies such as GEICO and Progressive continue to charge more to drivers based on their education level and occupation in New Jersey, when they were required to phase out this practice in neighboring New York state in 2018.”

The press conference follows a memo signed by more than 35 coalition members and national consumer organizations sent to DOBI a month ago. To date, coalition members have received no response other than a  one-sentence reply acknowledging receipt of the memo. The memo urged the Department to follow the example of lawmakers and regulators in seven states that have taken action against such rate-setting policies. In 2017, New York State, for example, issued a regulation sharply restricting the use of education and occupation in pricing unless insurers could demonstrate that their use is not unfairly discriminatory.  

Five states – California, Hawaii, Massachusetts, Nevada and Washington ban the use of credit information. And seven states – California, Georgia, Hawaii, Massachusetts, Michigan, New York, and Vermont – ban the use of education and occupation.

Coalition members had backed legislation putting a halt to these practices, but recently determined DOBI already has the authority to prohibit the use of credit scores, education, and occupation in auto insurance pricing and underwriting. Enacting this reform will help reduce premiums for consumers, combat unfair discrimination in auto insurance markets, and make insurance more fairly and accurately priced. 

In turn, eliminating unfair pricing factors would make coverage more affordable and accessible to low- and moderate-income drivers and drivers of color who are being unfairly surcharged because of their socio-economic status.  Fair auto insurance rates for all state residents will help reduce the economic hardships and financial instability that the pandemic worsened.

“Systemic racism is called that for a reason. It is built into our systems in sometimes non-obvious ways,” said Laura Sullivan, Director of the Economic Justice Program at the New Jersey Institute for Social Justice. “We are proud to be part of a coalition that recognizes that auto insurance rate setting is one of those ways, and we join the call on New Jersey to prohibit using non-driving factors to determine auto insurance premiums.”

“Non-driving factors like education, occupation and credit should have no influence on a consumer’s insurance premiums,” said Kevin Brown, New Jersey State Director and Executive Vice President of 32BJ SEIU. “The use of lower credit scores and lower wages systemically targets communities of color throughout New Jersey. We ask that the New Jersey Department of Banking and Insurance use its authority to end a practice that unfairly charges drivers of color, many of them essential workers, with higher premiums.”

Tony Scimone, New Brunswick resident and Garden State Leaders graduate, has an excellent driving record, and was shocked when his car insurance shot up from $80 a month to $374 a month after he purchased a new car. This new rate, through Progressive, was an annual increase of more than $3000 per year. Like many New Jersey drivers, Scimone’s insurance premium was based on his credit score. He was eventually able to secure a premium rate of $125 a month—after improving his credit score and extensive online research. 

“My credit score has nothing to do with my driving ability, record, or risk,” said Scimone. “On average there is a 156% increase in auto insurance rates charged to consumers with poor credit compared to those with excellent credit. My driving record is excellent, why should my or anyone else’s credit history be used to charge us much more?”