Credit-based insurance score

In July 2007, the Federal Trade Commission sent the US Congress a report on credit-based insurance scores in motor insurance: they predict losses well, and Black and Hispanic policyholders get lower scores on average. Both findings still hold, and so does the argument. A credit-based insurance score is a rating calculated from an individual's credit file, held by the US credit bureaus: payment history, debt levels, length of credit history, recent credit applications. It differs from a lending credit score but draws on the same data, and the Fair Credit Reporting Act allows access to the file for insurance underwriting, provided the consumer is notified when an adverse decision results. Motor and home insurers use it widely as a rating variable because, in their studies, it separates claim frequencies with a power few variables match, without anyone explaining convincingly why the way someone runs a bank account should say anything about how they drive. That opacity feeds the charge of proxy discrimination: a seemingly neutral variable, correlated with ethnicity and income, that makes already fragile households pay more. Regulation happens state by state. California, Hawaii and Massachusetts ban it for motor insurance; others restrict its use, for instance when a life event has damaged the file. In France, the tool does not exist and can hardly exist as things stand: no positive credit register is kept, the Constitutional Council struck down the national register of consumer loans on March 13, 2014, and the register of repayment incidents run by the Banque de France is not open to insurers for pricing.