New York May Limit Use of Credit Info for Car Insurance Ratings and Renewals

New York lawmakers introduced legislation in February that could limit how auto insurance companies use a driver’s credit history to assess and determine risk. The new legislation would specifically prohibit insurers from using credit history as a primary factor to assess a driver’s risk before issuing or renewing an auto insurance policy.

The act states that auto insurance companies can’t refuse to issue or renew a policy to a driver solely because of their credit information.

It would also prohibit insurers from requesting an existing policyholder’s credit information for the purpose of policy renewal.

Proponents of the legislation argue credit history is a poor way to evaluate risk.

“While many carriers might argue that there is a correlation between credit scores and driving history, it is just that, correlation and not causation,” New York Assemblymember Pamela Hunter, a sponsor of the bill, said in a statement to AM Best.

How other states handle the use of credit information

Most states allow insurance companies to use credit-based insurance scores when determining insurance premiums and deciding whether to insure someone.

Credit-based insurance scores are cumulative scores that consider a person’s credit history length, credit mix, outstanding debt, payment history, and new credit pursuits.

If an insurer determines a certain amount of risk, the company may then charge the driver higher car insurance premiums. For this reason, drivers with lower credit scores may end up paying more for car insurance than drivers with higher credit scores.

Six states currently have rules regarding credit-based insurance scores. California, Hawaii, Massachusetts, and Michigan ban insurance companies from using credit-based insurance scores. Oregon and Utah limit how insurers can use credit history in specific circumstances.

Legislators in Washington and New Mexico are also considering similar legislation to prohibit insurance companies from using credit information.

What’s next? Can bill advance after previous failed attempts?

Lawmakers previously introduced similar legislation in the New York Assembly during the 2021–2022 and 2023–2024 legislative sessions. The New York Senate also had a version of the bill in committee during the 2021–2022 session. No version of the bill has ever made it past the Assembly or Senate Insurance Committees.

The current bill is under review in the Assembly Insurance Committee and hasn’t reached the floor of the Assembly or Senate for a vote.

If the Assembly and the Senate pass the bill, Gov. Kathy Hochul will have the opportunity to approve or veto it.

Gov. Hochul hasn’t publicly indicated a stance on the bill.

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