September 24, 2020

Booker Introduces Bill to Prevent Automotive Insurance Discrimination

Companion to Watson Coleman's Legislation Seeks to Ban Education Level, Occupation and More from Decisions on Rates and Eligibility

Today, U.S. Senator Cory Booker (D-NJ) introduced a bill to ensure insurance companies use only driving records in determining car insurance rates and eligibility. The Prohibit Auto Insurance Discrimination Act, or PAID Act, would end the use of income, education levels, and other factors unrelated to driving history and ability, preventing insurance companies from using these details to raise rates for low income individuals, non-homeowners, and others who otherwise have good driving records. A companion bill was introduced in the House by U.S. Representatives Bonnie Watson Coleman (D-NJ) and Rashida Tlaib (D-MI).

“The use of factors unrelated to an individual’s driving record to determine auto insurance rates and eligibility is unfair and hurts working families,” Sen. Booker said. “Many communities across New Jersey and our nation already face undue obstacles that are only increasing economic inequality, and these unjust practices in the auto insurance industry are only adding to those challenges. I look forward to working with Congresswomen Watson Coleman and Tlaib to help level the playing field for working families by ending these unfair and discriminatory insurance practices.”

“Car insurance is absolutely necessary for most American families, so when companies raise rates for unfair, undisclosed, and unproven reasons, families are going to be hurt,” Rep. Watson Coleman said. “Proxies like where you work or whether you have a college degree don’t weed out bad drivers — they just create a two-tier system where those who make less get punished with higher rates to the tune of billions of dollars a year. Working families deserve better than a system that targets them and is fundamentally unfair. I’m grateful to Senator Booker who has joined Congresswoman Tlaib and I to bring an end to this practice.”

“Auto insurance discrimination on the basis of non-driving factors has allowed auto insurers to reap benefits off the financial struggles of too many Americans—and the pandemic has exponentially exacerbated those financial struggles,” Rep. Tlaib said. “I am so grateful to Senator Booker for taking the lead on this issue in the Senate. We are now one step closer to ending the predatory practice of auto insurers hiking rates and forcing folks to choose between paying their auto insurance, keeping a roof over their heads, or food on the table through no fault of their own.”

Insurance companies use so-called income proxies to set automotive insurance rates, despite no evidence that indicates such factors identify risky drivers. Use of these proxies results in higher rates charged to lower-income drivers while more affluent drivers see savings, costing working families billions of dollars each year.

The PAID Act would ban these practices by:

  • Barring the use of the following characteristics for calculating rates or deciding eligibility: 
    • Education;
    • Occupation;
    • Employment status;
    • Home ownership status;
    • Credit score, consumer report;
    • Gender;
    • Zip code or adjacent zip codes;
    • Census tract;
    • Marital status;
    • Previous insurer, or
    • Prior purchase of insurance.
  • Empowering the Federal Trade Commission (FTC) to enforce these prohibitions, and set the necessary regulations to do so.

Every state except New Hampshire and Virginia requires drivers to maintain car insurance, making it essential for families that rely on a vehicle to get to work, pick up groceries or drop their children off at school.