A recent study conducted by the Consumer Federation of America reveals that New Yorkers with poor credit histories are faced with significantly higher auto insurance rates, despite having comparable driving records to those with good credit.
The extensive analysis of insurance rates across all ZIP codes in the state by the CFA, highlighted a disturbing trend where insurers charge drivers with negative credit histories considerably higher premiums, often amounting to several hundreds or even thousands of dollars.
The study astonishingly found that drivers with bad credit may end up paying more than individuals convicted of DUI but who maintain excellent credit scores.
The CFA, a collective of nonprofit organizations advocating for consumer rights, has expressed serious concerns over these findings.
Chuck Bell, a prominent advocate and program director for CFA affiliate Consumer Reports, emphasized the issue’s severity, particularly for Black and Latino drivers. These communities often have worse credit scores compared to their white counterparts and frequently reside in ZIP codes already singled out for inflated insurance costs.
Bell drew attention to this issue, referring to it as a modern instance of red-lining. He stated, “It doesn’t take artificial intelligence or ChatGPT to bring about harmful results. This form of algorithmic discrimination is present and should be urgently prohibited.”
He revealed that as many as 5.2 million New York residents are unable to afford basic liability coverage, primarily due to these exorbitant rates.
Drawing attention to the fact that California, Hawaii, and Massachusetts have outlawed the use of credit history in determining insurance costs, the CFA is urging New York’s Governor Kathy Hochul, the state legislature, and the Department of Financial Services to critically review their study and reconsider current policies.
Assembly Majority Leader Crystal Peoples-Stokes is advocating for change and has proposed a bill to prevent insurers from considering drivers’ credit history and other socioeconomic factors when calculating auto insurance premiums.
Peoples-Stokes firmly believes in the need for choice, stating, “You have to choose a side. Either you’re assisting people in escaping poverty or you’re enabling industries like insurance to perpetuate poverty.”