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Credit-Based Insurance Scores

Last Updated 8/25/2023

Issue: Insurance companies often use consumer credit information in determining if they will offer a consumer automobile or homeowners' insurance policy and how much that policy will cost. A credit-based insurance score is a rating based in whole or in part on a consumer's credit information. Credit-based insurance scores use certain elements of a person's credit history to predict how likely they are to have an insurance loss. Credit-based insurance scores were introduced by the Fair Isaac Corporation (FICO) in the early 1990s. FICO estimates approximately 95% of auto insurers and 85% of homeowners' insurers use credit-based insurance scores in states where it is a legally allowed underwriting or risk classification factor.

Overview: Insurers use credit-based insurance scores primarily in underwriting and rating of consumers. Underwriting is the process by which the insurer determines whether a consumer is eligible for coverage and rating is the process that determines how much premium to charge a consumer. The credit-based insurance score models used by insurers are designed to predict the risk of loss. Insurers use credit-based insurance scores for underwriting to assign consumers to a pool based on risk and then for rating by deciding how to adjust the premium up or down.

Insurers argue that the use of credit-based insurance scores is necessary to properly evaluate risk and charge individual policyholders rates that most closely align with their true risk. They also note that not using credit-based insurance scores could result in lower-risk individuals bearing some of the costs from higher-risk individuals.

Typically, states will not allow credit-based insurance scores to be used as the sole basis for increasing rates or denying, cancelling or not renewing policies. Some states prohibit credit-based insurance scores being used as the sole basis in underwriting or rating decisions.  Some states require insurers to notify applicants or insureds that adverse credit-related decisions have been taken regarding pending applications or existing coverage based on the consumer's credit score. Currently, California, Hawaii, Maryland, Michigan, and Massachusetts ban or limit insurance companies' use of credit scores in determining policy rates. Washington Commissioner Mike Kreidler issued an order that was slated to go into effect March 4, 2022 that prohibited insurance companies from using credit scores to set policy rates on auto, homeowners, and renter's insurance for the next three years. However, this ruling was overturned by a state court and did not go into effect. Other states, such as Oregon and Utah, have established prohibitions on the use of credit history information in certain circumstances.  

Consumer groups continue to have concerns with the use of credit-based insurance scores, including the fact that most consumers do not understand the concept of credit-based insurance scoring or how or why it works. Many consumers are not even aware that their credit characteristics are being used to create a score that will then affect their purchase of an insurance policy. Even if they have the knowledge of the existence of credit-based insurance scores, it is not intuitive for consumers to understand how credit-based insurance scores work or why they work.

Some groups allege that the use of credit-based insurance scores falls disproportionately on certain minority and low-income groups. Moreover, the use of credit-based insurance scores may not appropriately encompass unforeseen life events, such as the recent Covid pandemic. 

Status: State insurance regulators continue to monitor the impact of credit-based insurance scores on consumers. At the NAIC National Meeting Spring 2023, the Transparency and Consumer Readability (C) Working Group and Property and Casualty (C) Committee both adopted and shared “Regulatory Resources for Consumers on Personal Lines Pricing and Underwriting – Auto Section,” which includes details and tops on credit-based insurance scores.

Committees Related to This Topic

Additional Resources

Report of the Executive (EX) Committee
NAIC National Meeting Spring 2023

Risk-Based Pricing of Property and Liability Insurance
July 2020, Journal of Insurance Regulation

Education & Training courses available to regulators related to this topic:

Education & Training course for consumers related to this topic:

Background on: Credit scoring (Insurance Information Institute, 2019)

Credit-Scoring FAQs (Nevada Division of Insurance)

Empirical Evidence on the Use of Credit Scoring for Predicting Insurance Losses with Psycho-social and Biochemical Explanations (North American Actuarial Journal, Vol. 20, Issue #3, 2016)

Studies, Reports and Surveys Examining the Use of Credit Scoring, Occupation or Education in Insurance (NAIC, 2013)

Consumer Insurance Score: Exploring the Possibility of an Alternative to Credit-Based Insurance Scores
July 2012, CIPR Newsletter

NAIC Credit Based Insurance Scoring Symposium
November 2011, NAIC Fall Meeting

Review of the Use of Credit-Based Insurance Scoring by Insurers (NAIC, 2008)

Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance (Federal Trade Commission, 2007)

Credit-Based Insurance Scores: Are They Fair? (Congressional hearing before the Subcommittee on Oversight and Investigations of the Committee on Financial Services, U.S. House of Representatives, 2007)

Biological and Psychobehavioral Correlates of Credit Scores and Automobile Insurance Losses: Toward an Explication of Why Credit Scoring Works (Journal of Risk and Insurance, 2007)

The Use of Credit History for Personal Lines of Insurance: Report to the National Association of Insurance Commissioners (American Academy of Actuaries, 2002)

News Releases

Testimony and Speeches


Media queries should be directed to the NAIC Communications Division at 816-783-8909 or

Aaron Brandenburg
Assistant Director, P&C Regulatory Services
(816) 783-8271

Tim Mullen
Director, Market Regulation
(816) 783-8260

Randy Helder
Assistant Director, Market Regulation
(816) 783-8261

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