AUTO INSURANCE: IT'S TIME FOR NEW JERSEY TO DROP THE SCORE

Across New Jersey, residents have expressed growing concern about the prospect of New York City's congestion pricing plan. For a state situated between two of the top 10 metro areas in the U.S. by GDP and where 91% of households have access to at least one vehicle, it's no surprise elected officials like Gov. Phil Murphy would insist "we're not going to relent if New Jersey commuters are discriminated against."

New Jersey depends on transportation for its economic survival. Yet most New Jersey residents might be surprised to find out they may already be paying the price of discriminatory policies in their home state; a consequence of outdated and unfair policies that allow auto insurers to base premiums on factors such as credit score, education, and occupation that have little to do with driving ability.

If elected leaders in New Jersey want to protect their constituents, they can start by ending this discriminatory policy once and for all.

Regardless of intent, the reliance on credit scores, which reflect decades of systemic economic and racial inequality, means auto insurance policies end up being biased in practice.

A recent study from the Consumer Federation of America found that on average New Jersey drivers with annual income below $50,000 paid nearly $700 more for auto insurance than those with income above $150,000.

To add insult to financial injury, an unfair system becomes downright discriminatory when race becomes an unintended rating factor.

According to the Urban Institute, 58% of white households have FICO credit scores above 700, while only 26% of Black households do. Looking at auto insurance rates across New Jersey you can see the destructive impact of historic disparities.

Car insurance is meant to protect consumers, not trap them in economic hardship. It's time to make insurance fairer and more equitable. Six states have already taken steps to limit or ban the use of credit scores in determining auto insurance rates.

Here in New Jersey, the legislation already exists.

The Fair Auto Insurance RatesAct, (A-1657/S-111) would accomplish this by prohibiting insurance companies from using education, occupation, or credit score to price premiums. And while it was passed by the State Senate nearly a year ago, it still sits with the Assembly.

The elimination of credit-based pricing is not just a moral good, it's an economic imperative. Moreover, given recent polling from Rutgers showing that 39% of residents list taxes as their top concern, policies that would increase competition and decrease costs for large swaths of the state are politically and economically advantageous.

Over the last decade, there have been major advances in technology that allows companies to measure risk based on actual driving behavior. For example, customers at Root Insurance can install an app that measures driving habits such as hard braking, speed of turns, and whether someone uses their phone while driving. This enables Root to calculate a rate that more accurately reflects how a customer drives and how risky they are behind the wheel.

It's time for the Assembly to stand up for hardworking New Jersey residents by supporting the FAIR Act.

Alex Timm is CEO of Root Insurance, based in Columbus, Ohio.