Consumer groups call on NV to keep rule that led to $20M in auto insurance refunds

The Nevada Department of Insurance returned $20 million to more than 160,000 drivers in the state whose premiums were increased during the pandemic because of a low or declining credit score. The average return was $127.

But during a state insurance advisory group meeting this week, consumer groups warned that many Nevadans, even those with perfect records, could face yet another bump to already rising premiums when the temporary regulation authorizing the refund discontinues in May, and called on the state to make it permanent. 

Nevada has some of the highest car insurance premiums in the nation.

During the first year of the pandemic, DOI determined that insurers’ credit score-based premium increases were discriminatory and violated state law. DOI implemented a regulation in December 2020 that prohibited companies from increasing any auto customer’s premium due to credit score drops during the pandemic, and required auto insurers to refund them. 

Michael DeLong, a research and advocacy associate at the Consumer Federation of America, said that the state should consider making the temporary regulation permanent and bolster protections for consumers from discriminatorily higher insurance rates. 

“State legislators need to step in, not only to continue the protection that refunded consumers $20 million but to prevent other industry strategies that punish drivers simply because of their socioeconomic status. That would not only prevent further financial pain; it will help people avoid being priced out of coverage and possibly having to drive uninsured, which puts everyone at risk,” DeLong said.

The temporary regulation was fully effective in February 2023 after the Nevada Supreme Court rejected an insurance industry challenge to the regulation. 

Advocate organizations noted that in addition to credit scores, other data sources insurance companies use to determine rates can lead to unfair discrimination, and encourage Nevada legislators to pass a law similar to one Colorado passed in 2021 that requires those data sources to be tested for bias against race, ethnicity, sexual orientation or faith. 

“The pandemic made clear that one type of data used by insurers could be unfair and unfairly discriminatory,” said Birny Birnbaum, executive director of the Center for Economic Justice, in a statement. “In the case of consumer credit information, the pandemic resulted in different prices for consumers with the same risk profile  — the actuarial definition of unfair discrimination. Insurers should be required to routinely test  these non-traditional sources of data for unfair discrimination and racial bias.”