Although insurance companies (along with everyone else) are prohibited from discriminating against their customers because of the color of their skin, their religion, and the like, many insurers are making decisions about how much to charge for insurance that result in minorities' paying more for the same level of coverage.

In Texas and many other states, an insurer looks at an insured's credit score to determine the amount it will charge for insurance. This practice (called "credit scoring") is defended by the insurance industry, which claims that there is a relationship between whether or not a person has good credit and whether or not that person will make claims on his insurance. In a nutshell, the insurance companies argue that low credit = higher costs.

However, opponents of credit scoring note that, unlike most of the other factors that insurance companies consider in setting rates, such as an insured's driving record or the number of claims made in the past, basing premiums on credit scores can result in a person who has never made any claims paying high insurance rates just because he has bad credit. The differences are not trivial: Credit scoring can result in one insured paying up to 400% more for the same coverage as another insured, just because of a low credit score.

Opponents of credit scoring also note that the practice costs minorities more to get insurance, because many minorities tend to have lower credit scores. A study of 2 million auto insurance policies in Texas showed that 90% of the drivers who had high credit scores were white, even though only 51% of the policies were issued to white drivers. Conversely, African-American drivers made up 33% of the group with the lowest credit scores, even though they represented only 7% of the drivers in the study. Opponents of credit scoring also express concern that even as incomes rise, the credit scores of minorities tend to remain lower than the credit scores of equivalent white households.

Some states have moved toward banning the practice of credit scoring, most often because it is felt that insurance companies should not be allowed to do indirectly what they are forbidden to do directly, while other states have resisted such a ban. Although a fairly new issue, the question of whether insurers should be allowed to set their rates by credit scoring is not one that is likely to go away any time soon.

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