Root Is Ahead of Car Insurance Industry in a Major Way

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Root insurance wants to make car insurance fair. That’s why the company sets its rates primarily on driver behavior rather than using discriminatory factors like credit scores.
It might sound like this puts Root at a disadvantage from its less conscientious competitors, but as more and more state governments ban the use of credit and demographic-based insurance rates, offering an option that sidesteps these factors could put Root ahead of the curve.
A woman drives a car with two hands on the wheel. An older man sits in the passenger seat next to her.
Root is trying to make car insurance rates based only on how well you drive.

The state of credit-based insurance bans across the country

Root has actively spoken out against the use of credit scores for determining rates since it began its ‘Drop the Score’ campaign in 2019, but state legislatures were pushing against the practice long before that.
California banned the practice already in 2003, according to Consumer Watchdog. Similar laws are now also in place in Hawaii, Massachusetts, Michigan, and as of June 20, Washington.
Illinois, New York, Oregon, and Utah have all limited the use of credit scores for determining rates in some way. Oregon, along with Colorado, New Jersey, and West Virginia, has legislation in the works that would ban the practice altogether, just like the other states mentioned above.

Telematics: the fairer factor Root uses to set car insurance rates

As car insurance trends away from using credit scores and demographics to determine rates, insurance companies like Root are adopting usage-based telematics as a fairer substitute.
Telematics is a broad term for the transmission of information over long distances—like phone calls, the Internet, and radio. In the context of insurance, it refers to the use of smartphone apps and other info gathering tech to determine rates based on drivers’ performance.
Using an app or a device installed directly into your vehicle, insurance companies track driving habits like how much you drive, how hard you brake, and how often you check your phone while behind the wheel. Then, they set your premium rates based on the info they collect, making your insurance prices more directly related to how you drive and less about your job, where you live, your credit score, and other discriminatory data.

The impact of credit scoring bans on your car insurance

While the move away from using credit scoring to determine premiums might make car insurance fairer, data collected from Root and other organizations shows that it probably won’t make much difference to the price of insurance.
The bans could actually increase rates for people with good credit, and providers will likely adjust their rate determinations so that low credit score holders only see temporary savings.
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