A new report from the Consumer Federation of America says New Yorkers who have bad credit pay far more for auto insurance than those with clean credit reports, even if they have similar driving histories.
By analyzing insurance premium data from every ZIP code in the state, the CFA found that insurance companies charge drivers with poor credit histories hundreds or even thousands of dollars in additional premiums.
According to the report, a driver with poor credit can even have higher costs than a person with a DUI conviction who happens to have an excellent credit history.
The CFA is an association of nonprofit organizations that advocate on behalf of consumers.
Chuck Bell, an advocacy program director for CFA member Consumer Reports, said the problem is compounded for Black and Latino drivers, who are more likely to have poorer credit than white consumers and who sometimes live in ZIP codes that are already targeted for higher insurance pricing.
"This is, indeed, a form of high tech red-lining," he said. "We don't have to wait for artificial intelligence or ChatGPT to do bad things. This is a form of algorithmic discrimination that needs to be banned."
Bell said 5.2 million people in New York state cannot afford basic liability coverage largely because of high rates.
Noting that three states — California, Hawaii and Massachusetts — ban the use of credit in insurance pricing, the CFA is calling on Gov. Kathy Hochul, the New York State Legislature, and the state Department of Financial Services to review its report and change its policies.
Assembly Majority Leader Crystal Peoples-Stokes has introduced legislation that would prohibit insurers from using a driver’s credit history and other socioeconomic factors to determine how much they pay for auto coverage.
"I think you need to pick a team," she said. "You're either going to help people get out of poverty or you're going to allow businesses like the insurance industry to keep people in poverty."
