FTC, Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance (Report to Congress, July 2007)

The study Congress ordered under Section 215 of the FACT Act, to determine whether credit-based insurance scores act as a proxy for race.

What it measured (Conclusion, §VIII, verbatim): “The FTC’s analysis revealed that the use of scores for consumers whose information was included in the FTC’s database caused the average predicted risk for African Americans and Hispanics to increase by 10% and 4.2%, respectively, while it caused the average predicted risk for non-Hispanic whites and Asians to decrease by 1.6% and 4.9%, respectively. These changes in predicted risk are likely to have an effect on the insurance premiums that these groups on average pay.”

The distribution (verbatim): “more than one-half of all African Americans have credit scores in the lowest quarter of the overall score distribution, and one-half of all Hispanics have credit scores in the lowest third of the overall score distribution.”

What it concluded anyway (verbatim): “Scores have only a small effect as a ‘proxy’ for membership in racial and ethnic groups in estimating of insurance risk, remaining strong predictors of risk when controls for race, ethnicity and income are included in risk models.”

The sentence that undoes the defence (verbatim): “It has not been clearly established why scores are predictive of risk.”

The alternative models (verbatim): “although the race neutral models that the FTC built accurately predict risk, they do not decrease the differences in credit-based insurance scores among racial and ethnic groups.” The Commission constructed scoring models using only non-Hispanic whites, and models discounting variables with large racial differences. The score gap did not close.

Retrieval note. ftc.gov returns HTTP 403 to automated fetch tools on every path, including the report landing page. It yields to curl with an ordinary browser User-Agent. Because this document has now defeated multiple research passes, the full 242-page PDF is preserved in this repository at reference/docket/sources/FTC_2007_credit-based-insurance-scores.pdf. No future session should have to re-fight the 403.

Correction on the record. Secondary sources, including the FTC’s own press release, render the racial finding as: “the use of scores is likely to increase the amount they pay for automobile insurance.” That sentence does not appear in the report body. Quote the Conclusion above, not the press release.