Poor credit costs La. drivers more on auto insurance than DWIs

By Claire Sullivan
Contributing Writer

(lailluminator.com) — Auto insurers in Louisiana and most of the country value good credit scores over safe driving, a recent report found.

Drivers in the state with poor credit and clean records pay $905 more than drivers with excellent credit who have been convicted of driving under the influence of drugs or alcohol, according to a report by the Consumer Federation of American, an association of consumer interest nonprofits.

“The research showed that in the vast majority of states, customers with pristine driving records but poor credit paid higher auto insurance premiums than excellent credit drivers who had a drunk driving conviction on their motor vehicle record,” the report reads.

Insurers in Louisiana – and 46 other states, plus the District of Columbia – are allowed to use credit scores to decide auto rates. Only California, Hawaii and Massachusetts prohibit the practice.

Most Americans assume their risk level is what determines their insurance premium, including factors such as their driving history and annual mileage. But the consumer report finds “several of the factors in their premium-setting algorithms do not relate at all to their driving and, instead, reflect customers’ socio-economic status.”

One of those factors is credit scores, which drastically affects drivers’ insurance premiums, the report found. Among Americans with good driving records, those with fair credit pay 49 percent more for insurance than those with excellent credit. Those with poor credit pay 115 percent more than those with excellent credit and 44 percent more than those with fair credit.

Louisiana auto insurance rates, across the credit spectrum, are significantly higher than the national average, according to the report. Compared with national averages for safe drivers, Louisianans with good credit pay $243 more, those with fair credit pay $392 more and those with poor credit pay $493 more.

Using credit as a factor in determining auto rates perpetuates income and racial inequalities, according to the report.

“Because credit history correlates to race and income,” the report reads, “raising premiums on drivers with lower credit disproportionately harms low-income consumers and people of color.”

This article originally published in the August 14, 2023 print edition of The Louisiana Weekly newspaper.