Assembly Speaker Craig Coughlin and the New Jersey Assembly must act now to end racial discrimination in setting auto insurance rates.
Currently, New Jersey auto insurance companies are allowed to set rates in part by using factors such as a person’s education, credit score, and job, despite the fact that these factors have absolutely nothing to do with a person’s driving ability and instead serve as proxies for income and race.
But it doesn’t have to be that way. If enacted, S111/A1657 would help end the discriminatory practice of setting auto insurance rates that disproportionately impact communities of color, working families, and our state’s most vulnerable residents.
Our state senate passed the bill in January, but it remains pending in the Assembly Financial Institutions and Insurance Committee. And like lots of other racial justice legislation, has yet to move forward in the lame-duck session. Change is overdue for our communities. If New Jersey fails to address institutional racism in auto insurance rates, how can we have any hope of addressing it elsewhere?
Car insurance can be a major expense and New Jersey’s current rate-setting policies force families into an impossible choice. Should they choose between gaining mobility and paying expensive, unfair rates?
Research compiled by the Consumer Federation of America found that New Jersey drivers living in majority Black and Latino communities were charged higher premiums on average than drivers living in majority-white New Jersey communities even if they had excellent driving records. People living in majority Black zip codes pay 49.5% higher premiums and people living in majority Latino zip codes pay 49.9% higher premiums.
The practice of using education, credit scores, and employment to set rates and provide discounts to white drivers with unsafe driving records while unfairly price gouging lower-income Black and brown drivers with good or even perfect driving records must stop.
S111/A1657 would curb this practice. This bill has immense popular support, having been championed by Senators Nia Gill, Teresa Ruiz, Nilza Cruz-Perez, and Nellie Pou.
More than 10,000 New Jerseyans have written letters to their Assembly members calling for them to quickly pass the legislation. Senator Cory Booker and Congresswoman Bonnie Watson Coleman introduced similar legislation at the federal level in Fall 2020, called the Prohibit Auto Insurance Discrimination (PAID) Act—H.R. 3693.
Massachusetts, New York, California, and Michigan have already banned occupation and education as auto insurance premium-rating factors; Massachusetts, California, and Hawaii have also banned the use of credit scores. Auto insurance markets in these states are stable and operate smoothly, and similar legislation is pending in other states throughout the country.
In fact, we have an example right here in New Jersey that proves the auto insurance industry wrong. Research by CURE Auto Insurance the only New Jersey insurer that does not use education, occupation, and credit scores to set rates for customers, shows this legislation would not result in higher average premiums for New Jersey drivers. Root Insurance, which offers lower insurance rates for drivers who score well on app-based driving tests, is eager to test the New Jersey market once the bill passes.
It’s time for our state to end this discriminatory practice that disproportionately harms Black and Latinx communities in New Jersey. Auto insurance premiums should prioritize public safety, and not profits that further contribute to New Jersey’s staggering racial wealth gap.
Systemic racism is just that: systemic. The Assembly must move forward with this important legislation and send a clear message: New Jersey’s values are driven by our people, not profit.
Amy Torres is the executive director of the New Jersey Alliance for Immigrant Justice and James Williams is the director of Racial Justice Policy at Fair Share Housing Center.