You kept your driving record clean and paid your bills on time. Your insurer and your bank noticed and they charged you less. That’s personalized pricing. Insurers and lenders call it underwriting.
A campaign to outlaw personalized pricing is moving through statehouses. New York’s One Fair Price Act awaits Gov. Kathy Hochul’s signature. What it exempts is the most revealing: anyone “subject to the insurance law” and pricing based on “an evaluation of creditworthiness.”
Without those carve-outs, the bill would outlaw how insurance and credit work.
So your safe-driver discount survives. For now.
Milton Friedman said nothing is so permanent as a temporary government program. Carve-outs run the other direction.
A legislature that bans personalized pricing has already written the case against its own exemptions.
In August, the Consumer Federation of America and the Electronic Privacy Information Center published a guide to surveillance pricing for insurers and objected to drivers with poor credit paying more — even though the Federal Trade Commission (FTC) found in 2007 that credit-based insurance scores predict claims.
Picture 100 drivers. Twenty-five careful drivers pay $75 a month, 50 average drivers pay $100 and 25 riskier drivers pay $150. Force one price that collects the same total and everyone pays $106.25. Careful drivers take a 42% increase for doing nothing wrong. The riskiest get a 29% break. Not a dollar of risk has left the pool.
The state system is underwriting’s best shield. Under the McCarran-Ferguson Act, the FTC’s authority over the insurance business applies only to the extent state law does not regulate it. A coalition headed by the National Taxpayers Union is urging the FTC to revise its personalized pricing proposal.
Credit would follow the same path. Rate caps aren’t underwriting bans, but they test the same idea. New York Fed researchers found that state caps cut credit for the riskiest borrowers without reducing delinquencies.
The bills even carve out loyalty-card discounts, conceding that some personalized prices help. Colorado Gov. Jared Polis vetoed his state’s version this year, warning that it would punish “differentially lower prices, not just higher prices.”
A clean driving record should count for something. If you ban personalized pricing, you won’t get one fair price. You’ll get a price that ignores your record, and your discount will go with it.