Auto insurance companies made investigation public by fighting to quash inquiry into use of credit history to choose customers and price car insurance
Seattle—Attorney General Bob Ferguson has announced that a Thurston County Superior Court judge rejected an attempt by PEMCO Mutual Insurance Company and subsidiaries of the Progressive Corporation to stop his office’s investigation of potential race discrimination against Washington drivers. The companies both use consumer credit histories — or “credit-based insurance scores” derived from a consumer’s credit history — to decide whether to sell, and at what price to sell, their auto insurance products, despite evidence that this practice disproportionately harms people of color.
PEMCO and Progressive have a significant presence in Washington state. PEMCO has issued approximately 160,000 private passenger auto insurance policies to Washingtonians; Progressive likewise insures a significant portion of Washington drivers. Both companies openly use credit history and/or credit-based insurance scores to decide who they will provide coverage to, and at what price. Publicly available information indicates PEMCO charges people with low credit scores as much as triple those with high credit scores; Progressive likewise significantly increases premiums for individuals with negative credit histories.
The companies brought the matter to court to fight the office’s investigation, making the investigation public.
The office has a longstanding policy that it does not comment on investigations, including confirming whether they exist. However, in fighting to quash the Attorney General’s investigative demands, the insurance companies revealed the investigation. Given the significant importance of, and the public interest in, the practices under investigation, the office is offering comment.
“Washington law is clear: Unfair, deceptive or discriminatory business practices are illegal,” Ferguson said. “Significant evidence shows that using credit history to price insurance disproportionately affects people of color — even when their driving history is just as safe as white drivers. My office has a responsibility to investigate race discrimination against Washingtonians. I intend to do that.”
Analyses show that the use of consumers’ credit history and/or credit-based insurance scores disproportionately affects drivers who are people of color, even if their driving records are just as safe as the driving records of white drivers. In 2020, the Consumer Federation of America, a consumer advocacy group, reported that when insurance companies rely on factors having nothing to do with driving, including credit scores, to price their insurance products, Black drivers “will pay more for auto insurance than white drivers, even when everything related to driving safety and vehicle type is held constant.”
According to the Consumer Federation of America, “[b]ecause insurance is required in every state but New Hampshire, the disparate pricing likely causes higher levels of uninsured driving among African Americans and higher incidence of state uninsured driving penalties for African Americans, which can include fines, car impoundment, and jail. It also means less access to vehicles and reduced access to jobs, as the nexus between car ownership and employment opportunity is well established.”
The Attorney General’s Office is seeking information about PEMCO and Progressive’s compliance with the Washington Consumer Protection Act and the Washington Law Against Discrimination as part of its investigation.