passed on January 28 and was received by the General Assembly the following day. It is currently pending review by the Assembly Financial Institutions and Insurance Committee. The New Jersey government moves forward as pressure grows to curb unfair insurance practices across the country.
States are focusing specifically on the use of credit scores to set premium rates after the
(CFA) released a report revealing that the practice unfairly penalizes lower-income Americans and contributes to systemic racism.
How credit scoring affects your car insurance
Credit scores are usually used to determine whether you can be trusted to pay off loans or buy products through financing agreements. Since you pay for your insurance policy before insurers cover you, it might seem odd that your credit score plays a role in setting your rates.
But insurance providers decide what you pay for insurance based on estimated risk, and, in 2007, the
, four states have already outlawed credit scoring for determining insurance rates:
Besides New Jersey, bills and/or temporary bans are also in process in the following states:
Colorado (bill passed state Senate, in the House Health and Insurance Committee)
Oregon (bill in committee)
Washington (bill in committee with a three-year ban in place)
West Virginia (in Senate committee)
Federally, New Jersey Rep. Bonnie Watson Coleman (D) introduced a bill to Congress called the PAID Act in February. If passed, the bill would outlaw the use of credit scoring for determining insurance rates in the U.S. It’s currently in the hands of the House Subcommittee on Consumer Protection and Commerce.
There are already limits on how your credit score can be used to set your insurance rates in Oregon. Insurance companies can’t deny your application or refuse to renew it based on your credit score. Similar laws also exist in Illinois, New York, and Utah.
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"B.A., English Literature, MedAndrew Koole is an insurance writer who specializes in writing automotive news articles. Andrew’s mission is to create informative and instructional content car owners can use to reduce costs, master repair skills, and learn more about the automotive industry. Andrew has published over 600 articles for Jerry on topics ranging from automaker history to car insurance deductibles. Before joining Jerry in 2021, Andrew split his time between freelance writing in the entertainment and travel industries and creative writing in poetry and fiction. His writing is featured on a variety of arts and travel websites, including his own Ponytail Press.