HR 1756 would prevent insurers from using credit scores in auto insurance

Representative Rashida Tlaib, a freshman congresswoman from Michigan, recently introduced HR 1756, a bill that’s of special interest to the insurance industry. The bill would prohibit auto insurers from using a person’s credit score or credit history as a factor in setting car insurance rates. The use of credit scores in determining car insurance rates has long been controversial. Several states (California, Massachusetts, and Hawaii) already ban it.

What is the HR 1756?

The bill would prohibit the three credit reporting bureaus (Experian, TransUnion, and Equifax) from giving consumer reports to anyone who would use the information in the underwriting or rating of auto insurance. Auto insurance premiums are based on many factors, such as the consumer’s driving record, years of driving experience, miles driven, the car itself, the driver’s location – and, in states where it is allowed, credit scores.

(The practice of using credit scores as a factor in setting auto insurance rates goes back to the 1990s. Insurers have used it to predict which consumers are most likely to file a claim).


Tlaib represents parts of Detroit, which has the highest auto insurance rates in the country. It’s her belief that a person’s credit score does not accurately reflect what kind of driver they are. She sees it as a form of red-lining. In a letter to her House colleagues seeking support for the bill, Tlaib points out that marginalized populations have fewer opportunities to build credit and less access to wealth. Tlaib believes that the use of credit information in auto insurance rates perpetuates discrimination and makes wealth inequality worse. Currently, there are 24 co-sponsors for HR 1756.

An article from The Detroit News about HR 1756 quotes Tlaib as saying, “Most of my neighbors and residents, they don’t have access to credit, and they shouldn’t be punished for being poor.”

Is there a correlation between filing a claim and a person’s credit score?

To make a case for the practice being beneficial, some in the insurance industry point to actuarial studies in which there is a relationship between a person’s credit score and their likelihood of filing a claim. However, Chuck Bell of the Consumer Reports advocacy division believes that the auto insurance industry has never actually proved a true link between a customer’s credit score and how safe a driver they are.

Some blame the high auto insurance rates in Michigan on the state’s requirement that drivers purchase unlimited medical payments coverage instead of the use of credit scores. But the article from The Detroit News mentioned above brings up a study indicating that a single adult driver with a clean driving record and a “Good” credit score can pay $403 more annually for car insurance than a driver with a clean driving record and an “Excellent” credit score. A study by Consumer Reports found that credit score may have more of an effect on a person’s auto insurance rates than a conviction for drunk driving.

Summing Up

Thus, the old debate over the use of credit scores in determining car insurance rates reaches a new chapter. Tlaib’s bill will certainly continue to spark conversations not only in Michigan but around the nation.

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