Drop the score
Root stands for fair car insurance. That’s why we’re removing credit score from our pricing model.
Our commitment to fairness
Eliminating credit scoring by 2025
By basing rates on demographic factors like credit score, the traditional car insurance industry has long relied on unfair, discriminatory biases in its insurance pricing. We’re here to change that.
Anatomy of a credit score
A credit score is a number between 300 and 850 that is used by lenders to assess whether a customer is reliable with money and paying off debts. A customer’s credit score is composed of a variety of factors, including payment history, amounts owed, length of credit history, credit mix, and new credit.
Customers who have a low credit score—or have no credit history at all—are traditionally more likely to pay higher car insurance premiums, or may be rejected completely. We still think it’s valuable for anyone with a low credit score to work on improving it for many reasons, but a car insurance rate shouldn’t be one of them.
The impact of credit score
Relying on credit scores disproportionately harms certain groups and reinforces the much bigger problem of inherent bias and systemic discrimination facing our country today. This means that certain groups of people are being asked to pay more for car insurance, including historically under-resourced communities, immigrants, people struggling to pay large medical expenses, people with errors in their credit history information, and people who have suffered an economic crisis.
The reality is that the best drivers may sometimes have terrible credit scores, but the risk they present on the road is minimal. People with low credit scores—even if they are the safest drivers—are paying as much as $1,500 more in annual premium payments than people with high credit scores, according to The Zebra.
The industry at large
Today, credit scoring is allowed in 47 states (all except California, Massachusetts, and Hawaii), and it is used by the 15 largest auto insurers in the country and over 90% of all U.S. auto insurers. At Root, we base rates primarily on driving behavior. So while credit scores already play a relatively small role in our current pricing model, we don’t account for them at anywhere near an industry average level—and we’re committed to removing it completely by 2025.
The road ahead
What is Root announcing?
Root will eliminate credit ratings from our premium price calculation by 2025. Car insurance should be bias-free, and we’re leading the way in creating a more balanced playing field for all.
Root has made some strides in eliminating bias from insurance ratings by never using occupation and education—both of which can be results of systemic bias—from any rating we issue. But we recognize that it isn’t enough. The best drivers should pay the lowest rates, regardless of their demographics or their credit rating.
Why isn’t Root immediately pulling credit scores from pricing?
Credit scores have long been viewed by the industry and regulators as one of the most predictive indicators of risk. Helping regulators understand and accept the use of telematics and other factors as a replacement for credit score will take time. But we know that it’s the right thing to do. Driving behavior, measured through telematics, can and will be even more predictive and far more fair than credit score when it comes to insurance rates.
Each state is regulated individually. We will work to demonstrate the inherent value and fairness in using telematics and eliminating credit scores as a factor in ratings on a state-by-state basis.
With today’s commitment, we are beginning the process to eliminate credit scoring from our models by 2025, and we also want to encourage the industry to move with us. It’s time to make car insurance more fair and equitable, and we know that it takes time for an industry to move.
Why do insurers use credit scores in the first place? How do credit scores predict driving behavior?
The industry has relied on credit score as a major factor in rates for decades. There is a correlation between credit score and the likelihood that someone will file a claim, though there is clearly no causation between credit score and safe driving.
We believe that pricing should be based primarily on actual driving behavior, and that the safest drivers should get lower rates because they are less likely to get into accidents.
How much do other insurers weigh credit scores?
Traditionally in the car insurance industry, credit score can be the second most heavily weighted part of a score, behind driving record. While that has never been the case with Root, it’s far too much weight on something that does not represent risk on the road.
Will Root provide updates on progress toward this goal?
Yes. We will hold ourselves accountable to this goal because we know it must be done—not for the health of our business, but because it’s the right thing to do.
Despite the seriousness and scale of the problem, we have a big job to do to make people aware.
Data from a new survey of Americans released by Root reveals that 66% of Americans don’t know that credit score is a factor in determining auto insurance price. Once aware, however, 63% feel that it’s completely unfair, and 93% think it's important for the industry to remove bias and discrimination from its pricing.