West Virginia lawmakers have introduced House Bill 5608, a measure that would restrict insurers from using credit history in underwriting home, private passenger auto, and other personal lines policies, according to BestWire.
The bill would block carriers from canceling, nonrenewing, or declining coverage based on a policyholder’s credit profile.
The proposal goes further. It would prohibit insurers from using credit scores to set rates, adjust discounts, assign rating tiers, or require specific payment plans.
Iowa legislators are reviewing a similar approach. State Rep. Ken Croken said repeated auto insurance marketing prompted him to question how credit ratings factor into premium setting.
He expected pricing to reflect driving history, garaging location, and driver age. After examining the issue, he said he found no clear link between credit scores and driving risk.
Croken argues lower credit scores may correlate with older vehicles lacking modern safety features, rather than unsafe driving behavior. He describes the practice as biased and calls for a ban.
Insurers push back. The American Property Casualty Insurance Association maintains multiple studies show credit-based insurance scores predict loss frequency.
Paul Tetrault, senior director of personal lines at APCIA, said eliminating credit-based insurance scoring would force lower-risk drivers to subsidize higher-risk drivers and limit carriers’ ability to price risk accurately.
To illustrate, Tetrault cited Washington state’s temporary prohibition. After the rule took effect, more than 60% of drivers saw premiums rise.
A state judge later struck down the regulation in 2022, ruling then-Insurance Commissioner Mike Kreidler exceeded his authority.
Credit-score restrictions remain in place in California, Hawaii, Maryland, Michigan, and Massachusetts, though each state structures limits differently. Hawaii adopted its ban in 1987 through legislation targeting discrimination in auto insurance.
The statute bars rate-setting practices tied directly or indirectly to factors including age, sex, driving experience, race, and creed.
In 2024, the Hawaii Supreme Court confirmed the prohibition applies to underwriting standards and rating plans, according to the Hawaii Insurance Division, which says the auto market remains stable and competitive.
California’s limits emerged from Proposition 103. State regulations confine auto rating factors to driving record, annual mileage, and driver experience.
The California Department of Insurance retains discretion to approve optional rating variables but has not authorized credit-score use.
Massachusetts and Michigan impose outright bans in auto underwriting. Maryland restricts credit use in homeowners underwriting and partially limits auto insurers from canceling, nonrenewing, or raising premiums due to deteriorating credit. Insurers in Maryland retain authority to lower rates when credit improves.
Tetrault said credit-score debates historically centered on auto coverage, given statutory purchase requirements and the link between vehicle ownership and economic mobility.
He added lawmakers now examine homeowners underwriting as catastrophe losses and volatility reshape property markets.
According to Beinsure analysts, extending credit bans into homeowners lines would alter risk segmentation at a time when carriers already confront higher reinsurance costs and capital strain.
Colorado presents a different model. Legislation passed in 2021 addresses discrimination concerns and regulates use of external consumer data, including credit information, algorithms, and predictive models.
Carole Walker of the Rocky Mountain Insurance Information Association said the framework applies across multiple lines. Implementation continues in phases, with rules for life insurers already in effect.
