# What the PAID Act Actually Does

Car insurance companies currently use a bunch of personal information to decide what they'll charge you for coverage—and it often has nothing to do with how safely you actually drive. The PAID Act (Prohibit Auto Insurance Discrimination Act) would ban insurance companies from using twelve specific factors when setting your rates or deciding whether to insure you at all. These banned factors include your education level, job, employment status, whether you own a home, your credit score, your ZIP code, and even whether you've had insurance before.

The core problem this bill addresses is that insurance companies have figured out that certain life circumstances tend to correlate with lower-income people, and they use these as proxies to charge them more. So if you're unemployed, work part-time, didn't finish college, rent your home, or have a lower credit score, you might get quoted a much higher rate than someone with the opposite characteristics—even if you're both equally safe drivers. Insurance companies argue these factors help them predict costs, but the bill's supporters say this amounts to discrimination based on wealth, since these factors don't actually predict whether someone will get in an accident.

If this bill passes, insurance companies would still be able to use traditional driving-related factors like your actual driving record, age, and type of vehicle. However, they'd lose access to the financial and personal background information they currently use to sort customers into different pricing tiers. The bill also requires insurance companies to make their underwriting rules public (instead of keeping them secret as trade secrets) and to prove their practices don't unfairly impact people based on race, color, national origin, religion, sex, or disability. Companies that violate the law could face penalties of at least $2,500 per violation, and individual consumers could sue for damages plus attorney's fees.