Root Insurance has announced plans to remove credit scores as a factor in its car insurance pricing model by 2025.
According to the firm, credit scores and other demographic factors such as occupation and education in car insurance rates indicate bias into drivers’ pricing.
Go deeper with GlobalData
This in turn impacts under-resourced communities, immigrants, and people with large medical expenses.
People who have low credit scores, even if they have a safe driving history, get being penalized to $1,500 or more in annual premium payments.
A new survey data issued by Root indicates 66% of people in the US are not aware that credit score is a factor in determining auto insurance prices.
On becoming aware of the credit score being considered for auto insurance price, 63% feel it is unfair, and 93% think it is important to remove bias and discrimination from the pricing system.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataRoot CEO and co-founder Alex Timm said: “Root was founded on the belief that good drivers should pay less for insurance since they are less likely to get into accidents. Eliminating credit scores is a major and necessary step towards dismantling archaic industry practices and making car insurance fairer.
“We are committed to working with our partners, regulators, and industry stakeholders to adopt this important change, and hope our announcement today inspires others to join us in fighting discrimination, bias, and systemic inequity in auto insurance. It’s time to drop the score.”
Following the latest announcement, the company plans to commence engaging regulators and other stakeholders to make this change by 2025 or sooner, while also ensuring a smooth transition for policyholders.
Credit scoring is currently allowed in 47 US states with the exception of California, Massachusetts, and Hawaii.
Furthermore, it is deployed by the 15 largest auto insurers in the country and over 90% of all auto insurers.
