A new law has passed in Massachusetts that will ban insurers from pricing auto insurance based upon socioeconomic factors. Governor Deval Patrick signed the associated bill into law this week and believes that it will afford consumers with more protections against insurers constantly on the lookout for extra money. The ban was already enacted in the state some months ago but existed only as an administrative regulation. The bill’s passage comes after months of legislative struggle and conflict between consumer advocacy groups and insurance companies.
Insurers opposing the measure claim that credit score, along with other socioeconomic factors, play a small but important role in pricing insurance. Insurers often use credit score to determine the financial risk of insuring an individual or vehicle. Without being able to use these factors, insurers claim that they pricing of auto insurance policies will be less accurate. This, in essence, will drive up insurance premiums as insurers attempt to adjust the prices of coverage to account for any risk they cannot calculate.
Massachusetts is home to some of the most aggressive laws concerning the use of socioeconomic factors in underwriting. Insurance companies in the state have long battled to change these laws in the hopes of creating a friendlier environment for the insurance industry. These attempts have largely been unsuccessful, however, as state legislators continue to enact laws regarding what can and cannot be used in terms of insurance.