Credit-based insurance scores impact US auto insurance rates

In much of the United States, auto insurance premiums are heavily influenced by credit history through a metric known as a credit-based insurance score. This proprietary metric, which differs from standard consumer credit scores like FICO, is used by an estimated 95% of U.S. insurers in states where the practice is permitted.

Insurers use these scores to predict the likelihood of a policyholder filing a claim, drawing data from credit bureaus regarding payment history, total debt, and the frequency of new credit applications. Because each insurer uses its own proprietary formula, identical drivers may receive different quotes from different companies.

A patchwork regulatory landscape exists across the country. While many states allow the practice, an increasing number are moving to restrict or prohibit the use of credit data in insurance pricing. These restrictions are often driven by concerns regarding fairness and the disproportionate financial impact on lower-income drivers and communities of color.