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Published: Jan 21, 2021 5 min read
Startups seek to make auto insurance less discriminatory
Money; Getty Images

Even if you're a great driver, having tarnished credit usually means you pay more for car insurance. Now a pair of start-ups are promising a way around that, although you may have to wait for these products to hit the market.

Few things about car insurance are as controversial as the near-universal use of credit scores to help determine the premiums drivers pay. Car insurance companies look at all kinds of data to try to figure out which drivers are most likely to force costly payouts. And they argue that drivers who pay their bills also tend to avoid traffic accidents. “Studies suggest that how a person manages his or her financial affairs...is a good predictor of insurance claims,” says trade group the Insurance Information Institute.

Insurers, then, seek out your credit score when you apply for a policy, just as lenders do for loans, and use the data to help determine the premiums you will pay. “This allows carriers to better match insurance premiums with the risk that an individual insured might pose, helping prevent better risks from subsidizing bad risks,” says the trade group.