A new bill in New York has been introduced that would alter the way auto insurance is done. Assembly Bill 6053 has been brought into New York’s State Senate office, with power to restrict auto insurers in their risk assessments. The bill would create limitations on insurance companies using driver credit history. They would no longer be able to use this marker as a primary factor in generating auto insurance policies or when adjusting an existing policy during its renewal period. Furthermore, it would prevent insurance companies from being able to even ask for a policyholder’s credit information when renewing a plan. This would create a major shift in the way auto insurance policies are created for the individual.
The bill is the first step in a major credit shift for insurance.
Insurance Business Magazine reports that Assembly Bill 6053 is connected to a grander idea being tossed around in New York City. Many are debating the power credit has in insurance pricing and are wanting to shift away from this pattern. However, while lawmakers feel this way, insurance companies argue that this greatly affects safety concerns. Insurers claim that using credit history allows them to predict the likelihood of claims, as well as the severity of them.
Other opponents to the bill claim premiums will increase with this change.
Specifically, trade groups have made arguments against the bill in this fashion. They argue that removing credit scores from the policy building stage could create higher premiums. The groups make this claim, stating that drivers who are considered low-risk under the current standards could now be considered high-risk and subject to higher rates.
Nonetheless, lawmakers hold strong in their position.
One Assemblymember, Pamela Hunter from Syracuse, has fully expressed her support of the bill. Hunter is on the insurance committee off the state Assembly and agrees that credit scores are unreliable in this case. She argues they do not help identify driving risk. Hunter describes the connection between credit scores and driving history as “correlation, not causation,” meaning that drivers with low credit scores could be risky drivers, but having a low credit score does not mean you are guaranteed a risky driver. A driver can be both, but they do not have to be.
She further breaks down her argument, expressing that the current structure unfairly penalizes low-income individuals. Because credit is so significant in current premium structuring, drivers with clean driving records are stuck paying high rates because they have low credit scores. Hunter and other bill supporters argue more weight should be put on an idea known as behavioral-based underwriting. This would be done through telematics, which are methods used to track a driver’s habits, such as speed and braking. Supporters argue that these are better identifiers into a driver’s risk than credit history.
New York is not alone in this fight.
Other states are making waves to step away from credit history in insurance pricing. Washington state and New Mexico are the states making the most progress in this law change.
