Maryland Lawmakers Bow to Insurance Companies Allowing Continued Use of Discriminatory Credit Scoring in Pricing Insurance

CFA Urges Legislators to Keep Fighting Against Unfair Use of Credit Scores in Auto Insurance

Washington, DC. – The Consumer Federation of America (CFA) called on the Maryland House of Delegates and the Maryland Senate to defeat an effort by the insurance industry to pass legislation enshrining insurers’ use of credit scoring for determining auto insurance eligibility and setting premiums. The consumer group criticized the members of the Maryland House Economic Matters Committee who, today, gutted a reform bill that would have eliminated the credit score penalty imposed on many safe drivers in Maryland (H.B. 436—Delegate Wells) and replaced it with an industry-sponsored placebo that does nothing to address the disproportionate, unfair, and unnecessary impact that insurer use of credit scoring has on Maryland drivers.

“Maryland politicians who set the rules for auto insurance markets decided to cater to insurance lobbyists rather than stand up for consumers,” said Douglas Heller, CFA’s Director of Insurance. “State law requires drivers to purchase auto insurance, so state lawmakers have a responsibility to ensure a fair marketplace. Instead, they have preserved a status quo that leaves high premiums in place for those least able to afford coverage as well as many other Marylanders who get punished for blemishes on their credit score even when they have an unblemished driving record.”

CFA noted that the Committee’s dismantling of the credit score ban took the form of an amendment that replaced the prohibition with an industry strategy intended to ward off meaningful reform. The amendment is based on proposals that insurance industry lobbyists have promoted in other states contemplating reforms; it adds a very weak provision to Maryland law allowing consumers to ask their insurance companies to reevaluate their premiums based on credit score under certain circumstances. Under the industry-sponsored amendment, insurers will still be allowed to charge a driver with a perfect safety record but a less-than-excellent credit history more than a driver with an excellent credit score and a conviction for driving under the influence, a problem exposed by Consumer Reports.

The original bill was supposed to address an aspect of pricing in Maryland’s auto insurance market that has been especially harmful to Black and Brown drivers, who have long-faced systemic biases that have resulted in lower average credit scores and, therefore, higher auto premiums. The credit impact, even for drivers with perfect driving records, amplifies other problems in the auto insurance market that makes coverage less available and more expensive for communities of color. An analysis by CFA and the Maryland Consumer Rights Coalition found that zip codes with a majority Black population already pay far higher premiums than zip codes with a majority white population, even before accounting for the disparate impact of the use of credit by insurers.

“Credit scores in auto insurance result in Maryland drivers paying hundreds or even thousands of dollars more for auto insurance, even when they have perfect driving records,” said Michael DeLong, CFA’s Research and Advocacy Associate. “Rather than challenge insurance companies to better serve Maryland’s communities of color and other financially vulnerable consumers, the Committee has decided to preserve a system that makes safe drivers subsidize drunk drivers who happen to have good credit.”

Michael DeLong, 925-708-1135
Doug Heller, 310-480-4170