New York considers restricting credit use in auto insurance

New York state legislators are examining a new bill introduced in February aimed at regulating how car insurance companies utilize credit history in assessing driver risk. This potential legislation would stop insurers from using credit scores as a primary factor for issuing or renewing auto insurance policies.

According to the proposed legislation, companies would be restricted from declining to issue or renew policies solely based on credit history. Furthermore, it would prevent insurers from seeking existing policyholders' credit information during the renewal process.

Supporters of the proposal argue that credit history is not a reliable risk assessment tool. "While many carriers might argue that there is a correlation between credit scores and driving history, it is just that, correlation and not causation," stated New York Assemblymember Pamela Hunter, one of the bill's sponsors, in a statement to AM Best.

The practice of using credit-based insurance scores is common across most states, where it helps decide insurance premiums and coverage eligibility. These scores consider various factors of one's credit, like history length, debt levels, and payment records. Consequently, drivers with lower credit scores often face higher insurance premiums.

Currently, six states have regulations restricting the use of credit-based insurance scores for car insurance. California, Hawaii, Massachusetts, and Michigan have fully banned the practice, while Oregon and Utah enforce limits under specific circumstances. Other states, such as Washington and New Mexico, are also debating similar legislative measures.

Previous efforts in New York to enact similar laws were introduced in both the Assembly and Senate during prior legislative sessions but never advanced past committee reviews. Presently, the bill remains under consideration in the Assembly Insurance Committee, awaiting progression to a full vote before both houses.

Should the Assembly and Senate eventually approve the legislation, it will proceed to Governor Kathy Hochul for either approval or veto. To date, Governor Hochul has not publicly disclosed her position on the bill.