Tlaib pushes ban on linking credit scores, car insurance
Washington — Freshman U.S. Rep. Rashida Tlaib hammered representatives of the insurance industry as she pushed a bill she introduced that would block insurers from factoring in a consumer's credit history when setting auto rates.
In a hearing of the U.S. House Financial Service Committee, Tlaib, a Detroit Democrat, said credit history or scores have nothing to do with how people drive, and using them results in discrimination against low-income consumers in her district.
"This is one of the most critical issues in the state of Michigan that is keeping people in poverty because of these high rates," she said before pressing a representative of the National Association of Mutual Insurance Companies to answer questions about her zip code, education level and credit score.
“These are the questions that are asked for my residents," Tlaib said. "It has nothing to do with whether or not they’re a good driver. It has nothing to do with whether or not they are susceptible to accidents or any of that. These are proxies to discriminate."
Tlaib represents parts of Detroit, which has the highest auto insurance rates in the nation, but says the issue is one of fairness that resonates with her colleagues from around the country.
Her bill, HR 1756, would prohibit the three credit bureaus from providing consumer reports or consumer information "to any person for use in making any decision to underwrite or rate auto insurance."
It also would ban the use of consumer information for auto insurance underwriting or rating of any motorist in connection with an auto insurance transaction.
Tlaib has 26 co-sponsors for her bill, but is facing staunch resistance from the insurance lobby, which opposes the legislation as "well-intentioned" but flawed.
"NAMIC is here today to speak in strong opposition to legislation designed to institute broad prohibitions on the use of legitimate and predictive underwriting tools in auto insurance," Erin Collins, vice president of state affairs for National Association of Mutual Insurance Companies, said. "It's our view that federal legislation in this area is unwarranted and unnecessary, and it has been demonstrated time and time again that such underwriting restrictions harm policy holders by driving up insurance costs across the board."
Collins said Tlaib's measure would run counter to the methods that make the auto insurance industry successful.
"The goal of insurance underwriting is to correlate the prices for insurance policies as closely as possible to the likely cost of claims generated by those policies," she said. "The more accurately a company targets the actual costs, the better they are able to serve their policy holders, which in turn enables them to offer more products to more individuals."
Tlaib cited a study by the University of Michigan that showed that a driver with average credit score would pay 300% more than a driver with a lower credit score who has an arrest for driving under the influence on their driving record and a ProPublica report that showed insurers charge higher rates in minority zip codes.
She pressed Collins about her organization's opposition to a federal study that would examine the impact of high insurance rates on drivers in lower-income communities.
"Justifying racial disparities by pointing to differences in risk is an argument that falls apart when we really investigate the data," she said. "Why would the association be against a study just to investigate the data regarding disparate impact of auto insurance rates? Why don’t you want to know if it impacts your consumers, you know the ones who are paying into the system, to make sure they're not be discriminated against?"
Collins replied: "NAMIC is supportive of objective studies that look at all underwriting and rating factors.
"There are numerous studies that look at these studies," she said. "If you're speaking to the measure in this committee, you noted that I said objective study. I believe that studies should not be built with conclusions in mind, and that particular bill seems not to meet that test, so we would oppose that measure."
Douglas Heller, insurance expert for the Consumer Federation of America, agreed with Tlaib that the federal government should ensure fairness in auto insurance pricing.
"Since the purchase of insurance is mandated by law in almost every state, we believe government has a special obligation to ensure that insurance is available, affordable, and priced fairly in the marketplace," he said. "However, in many states across the country, the market for auto insurance is not fair for low- and moderate-income Americans and drivers in communities of color, even if the drivers have a perfect driving record."