A new push to overhaul how auto insurance premiums are calculated in the United States is gaining momentum. This week, the Prohibit Auto Insurance Discrimination (PAID) Act was reintroduced in the U.S. House of Representatives, targeting what many say are unfair and discriminatory pricing practices in the car insurance industry.
The bill, championed by Representatives Rashida Tlaib, Bonnie Watson Coleman, and Mark Takano, aims to eliminate non-driving-related factors from premium calculations. If passed, it would ban the use of credit scores, education levels, income proxies, and similar metrics that have no proven connection to driving ability.
What Does the PAID Act Seek to Change?
Auto insurance companies have long used personal information unrelated to driving behavior when determining policy premiums. These include factors such as:
- Credit score
- Education level
- Occupation and employment status
- Homeownership
- Marital status
- Zip code or adjacent zip codes
- Census tract
- Previous insurer
- Prior insurance purchase history
- Gender
Under the PAID Act, these elements would no longer be allowed to influence a driver’s insurance eligibility or pricing.
Also Read: How Insurance Companies in California Use Discrimination in their Underwriting Guidelines
Why Lawmakers Say Change Is Urgently Needed
For many American families, car insurance is not a luxury — it’s a necessity. However, in cities like Detroit, where Rep. Rashida Tlaib serves, residents continue to pay some of the highest auto insurance rates in the country.
“My residents still pay some of the highest auto insurance rates in the nation,” Tlaib said in a press release. “Your education level, zip code, credit score, home ownership status, job, and marital status do not determine your driving ability.”
According to Tlaib, these so-called “predatory and discriminatory practices” lock low-income individuals in a vicious cycle. High insurance costs make it harder for them to afford coverage, which in turn affects their ability to maintain employment or access basic needs like healthcare and childcare.
The Problem With Income Proxies in Insurance
One key issue the bill tackles is the use of income proxies. These are metrics that insurers may rely on when actual income data is unavailable. While intended to help underwriters assess risk, critics argue that these proxies unfairly penalize lower-income drivers without strong evidence that they’re more accident-prone.
“We have to start to acknowledge that we’ve allowed systems in this country to drain the earnings of those least able to afford it,” said Congresswoman Bonnie Watson Coleman. “Car insurance practices are part of the problem.”
She added that the current system often charges higher premiums for reasons that are not transparent or justified, effectively creating a two-tiered insurance market.
“Factors like where you work or whether you have a college degree don’t weed out bad drivers — they just create a system where those who make less get charged more,” Coleman stated. “Working families deserve better than a system that is fundamentally unfair.”
Also Read: What You Need to Know about Getting the Best Car Insurance Rate
A Call for Fairness in Auto Insurance Pricing
The reintroduction of the PAID Act comes amid growing national concern over economic inequality and systemic bias in financial services. Auto insurance, although widely required, often mirrors deeper social disparities.
While insurers claim that these pricing models help predict future claims, consumer advocacy groups argue that they unjustly inflate costs for low-income and minority communities. Removing these criteria from underwriting decisions, proponents argue, would make insurance pricing more equitable and transparent.
What’s Next for the PAID Act
The bill’s reintroduction signals that lawmakers are not backing down on this issue. As more evidence emerges about the negative impact of data-driven pricing that relies on non-driving factors, public pressure may increase.
So far, there is bipartisan interest in examining how insurance companies use data and algorithms. However, the road to passing the PAID Act may face resistance from insurers who argue that these factors help manage risk and control fraud.
Still, the conversation is shifting. With the reintroduction of the PAID Act, legislators are making it clear that driving ability, not personal background, should determine what Americans pay for car insurance.
Also Read: 12 Things That Determine Car Insurance Rates For Seniors Above 65
Key Takeaways for Consumers and the Insurance Industry
- The PAID Act seeks to remove non-driving-related factors from auto insurance pricing, including credit score, education, and zip code.
- Supporters say the bill promotes fairness and transparency, especially for low-income families.
- Critics argue that removing these variables may impact insurers’ ability to assess risk, although evidence suggests the opposite.
- The bill’s success could lead to widespread reforms in the way car insurance is priced across the United States.