Is it racist to use of credit scores to price auto insurance?

The Federal Trade Commission has recently completed a study of the practice of using credit ratings to price auto insurance, a practice several states forbid because blacks and Hispanics as a group tend to have poorer credit records.

Marginal Revolution points out

(1) the FTC finds credit records are very good at predicting accident risk implying that good black and Hispanic drivers pay higher rates in states that prohibit the use of credit risk;

(2) when the price of insurance increases for good drivers in these states, good drivers may quit buying insurance, pushing up the price of insurance for bad drivers to the price they would have paid without the prohibition.

Good intentions do not necessarily make for good public policy.

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