Consumer groups say auto insurers penalize drivers with poor credit [The Buffalo News, N.Y.]

Apr. 26—Drivers in the City of Buffalo pay hundreds of dollars more in auto insurance premiums than drivers in places such as Rochester, Albany and Syracuse, and the disparity is even wider when a driver's credit score is taken into consideration, a new study shows.

If you have a bad credit score or live in a certain ZIP code, you will pay more for your auto insurance, even if you have a perfect driving record, according to a study from the Consumer Federation of America, an association of nonprofit consumer organizations. Those criteria disproportionately affect poor people and people of color, the study showed.

Now, some legislators are trying to put an end to the practice of using credit scores and ZIP codes in insurance underwriting.

Assembly Majority Leader Crystal People-Stokes said the practice of using credit score to underwrite auto insurance policies is unfair, and she has introduced legislation to end it.

"Insurance companies have been consistently discriminating against Black, brown and poor people," she said. "It is totally unfortunate that your credit score, not your driving record, will determine how much you would pay for your insurance."

In New York, the average driver with a clean driving record will pay $1,759 more in premiums if they have poor credit than if they had excellent credit, according to the study.

Even a driver with a DWI conviction pays less on average than a driver with bad credit, the study showed. The average driver with bad credit and a clean driving record will pay $589 more than a driver with excellent credit who has been convicted of driving while intoxicated, it showed.

People-Stokes said she herself pays a higher premium simply because of her ZIP code, after looking at the study data.

"I live in 14208 and guaranteed, we pay more for insurance in that ZIP code than other places do across the state," she said.

On average, drivers with excellent credit pay $826 in annual insurance premiums in Buffalo, compared to those in Albany who pay $568, Rochester who pay $551 and Syracuse who pay $594.

Alex Chrzanowski, owner of the Chrzanowski Agency, said ZIP code matters because insurers look at claims history in that geographic area, which can show how prevalent auto thefts are in the region, for example.

"Look at the Kia and Hyundai car thefts alone," he said. "Even cars stolen from the suburbs are often found or crashed in the city."

Insurers use credit scores to calculate premiums because drivers with better credit scores tend to get into fewer accidents and cost insurance companies less than their worse-scoring counterparts, insurance company Allstate said on its website, pointing to a study by the Federal Trade Commission to understand the relationship between credit history and risk.

The average driver with poor credit in Buffalo pays $2,259 in premiums, compared to those with poor credit in Albany who pay $1,486; in Rochester who pay $1,445 and in Syracuse who pay $1,584, according to the Consumer Federation of America report.

Chrzanowski said he understands the criticisms of using credit scores to calculate insurance premiums, but said not using credit scores would likely result in higher premiums for everyone, he said.

In 2019, New York banned the use of education and occupation when calculating auto insurance premiums. That caused insurance rates in the state to rise overall, according to the Insurance Council of New Jersey, which studied the impact.

Consumer groups have been pushing for credit scores and location to be eliminated as factors in setting auto insurance rates for years. California, Hawaii, Maryland, Michigan and Massachusetts ban or limit insurers from using credit scores in determining auto policy rates.

Insurance providers are not allowed to decline an insurance application based solely on credit information, and can't use credit data to terminate a policy or raise premiums during policy renewal, according to the state Department of Financial Services. They also can't calculate premiums using a driver's income, address, ethnicity, religion, marital status, nationality, or gender; and must address any problems caused by incorrect or incomplete credit data.

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