State Regulations That Limit Which Factors Insurers Can Use

Why Your State Determines What Insurers Can Look At

Insurance is regulated at the state level, not federally. That means the list of factors your insurer can legally use to calculate your premium depends entirely on where you live — not on what's actuarially convenient for the carrier. Two drivers with identical histories, vehicles, and credit scores can face very different premiums simply because one lives in California and the other in Texas.

This isn't a loophole. It's intentional policy. State legislatures and insurance commissioners have the authority to determine which rating factors are permissible, how much weight any single factor can carry, and in some cases, whether a factor can be used at all. When a state bans a factor, insurers operating there must file rates that don't include it — and regulators review those filings before they take effect.

Understanding which states restrict which factors gives you two advantages: you know what's driving your rate, and you know what you can legitimately dispute or seek alternatives around. Let's go through the major restricted factors state by state.

Credit Score Restrictions: California, Massachusetts, Hawaii, and Michigan Lead the Way

Credit-based insurance scoring is one of the most contested rating factors in the industry. In most states, insurers are free to use it — and they do, because actuarial data shows a statistical correlation between credit behavior and claim frequency. But several states have decided that correlation doesn't justify the practice, either because of its disparate impact on lower-income households or because the connection feels indirect to consumers.

California (Proposition 103, 1988): California is the most prominent example. Prop 103, passed by voters, prohibits insurers from using credit history as a rating factor for auto insurance. Insurers must price policies based on driving record, miles driven, and years of driving experience — in that order of priority. No credit score, no insurance score derived from credit data.

Massachusetts: Also bans credit scoring for auto insurance. Massachusetts operates under a unique managed competition system where the state heavily regulates rate structures, and credit has never been a permitted factor.

Hawaii: Prohibits the use of credit-based insurance scores for auto and homeowners insurance. Hawaii's Division of Insurance has taken the position that credit scores can proxy for race and income in ways that violate fair access principles.

Michigan: Passed the Automobile Insurance Reform Act in 2019, which among other changes significantly restricted the use of credit scores in auto rating, alongside restrictions on other non-driving factors.

If you live in one of these states, your credit history has zero legal bearing on your auto premium. For everyone else, it very likely does — see how credit scoring actually works in auto insurance for a full breakdown of the mechanics.

The COVID-19 pandemic also produced temporary restrictions in many states, with commissioners ordering insurers to pause adverse credit actions. A handful of those temporary orders influenced permanent rulemaking — worth checking your state DOI's current guidance.

Gender as a Rating Factor: States That Have Removed It

Using gender to price auto insurance is actuarially defensible — young male drivers statistically have more accidents and more severe ones than young female drivers of the same age. But several states have decided that charging people differently based on sex is discriminatory regardless of the data.

States that currently prohibit gender as an auto insurance rating factor include:

• California — banned under Prop 103
• Hawaii — prohibited by state statute
• Massachusetts — prohibited
• Michigan — banned under the 2019 reform act
• Montana — Montana's Human Rights Act has been interpreted to prohibit gender-based insurance pricing
• North Carolina — prohibited for auto insurance
• Pennsylvania — prohibited

In these states, a 19-year-old male driver and a 19-year-old female driver with identical records must be quoted the same rate. Insurers absorb the actuarial difference by redistributing risk across their entire book of business in that state — which typically means slightly higher rates for young women and slightly lower rates for young men compared to states where gender is permitted.

Some states that allow gender also allow non-binary classifications, following NAIC model guidance. This is an evolving area — several state commissioners have issued bulletins in the past three years encouraging or requiring insurers to offer a non-binary gender option in applications.

Age, Marital Status, and Education: The Softer Restrictions

Age is almost universally permitted as a rating factor — it's hard to argue that age-related driving risk is discriminatory in the way that race or income might be. However, a few nuances exist:

• Surcharges on elderly drivers: Some states restrict how much weight age can carry for drivers over 65, particularly if the driver has a clean record. California, again, caps the influence of age relative to driving history.
• Young driver surcharges: These are broadly permitted, but some states limit the magnitude. In Massachusetts, the surcharge structure for drivers under 25 is tightly regulated by the state's managed competition framework.

Marital status is permitted in most states but is a factor of diminishing use. Married drivers statistically file fewer claims, and many insurers apply a modest discount. However, California prohibits it as a primary rating factor. New York and a few other states have scrutinized marital status for potential disparate impact on widows and divorced individuals.

Education and occupation are increasingly controversial. Some insurers use educational attainment or job title as proxies for risk — the logic being that people with graduate degrees tend to be lower-risk. Critics argue this effectively prices by socioeconomic class. California bans both. Michigan's 2019 reform also prohibits using educational attainment, occupation, or homeownership status. In most other states, these factors are technically permitted but regulators are watching them more closely.

For a full picture of which factors carry the most pricing weight where they are permitted, see how insurers actually weight each variable.

ZIP Code and Territory Rating: What Counts as Redlining?

Where you garage your vehicle is one of the most powerful rating factors in auto insurance. Urban areas with higher theft rates, more traffic density, and higher medical costs generate more and larger claims — so insurers charge more. This is generally legal and broadly accepted.

But using geography as a rating factor becomes legally problematic when it produces outcomes that closely track racial or ethnic composition of neighborhoods. This is sometimes called insurance redlining, and it's prohibited in all states under the federal Fair Housing Act (for homeowners insurance) and various state civil rights statutes.

The practical distinction regulators draw is between legitimate territorial rating (charging more in ZIP codes with objectively higher loss experience) and discriminatory territorial rating (charging more in ZIP codes primarily because of demographic composition, without adequate loss-data justification).

• California: ZIP code can be a rating factor, but must be secondary to driving record, miles driven, and years of experience. Insurers cannot weight geography more heavily than those three primary factors.
• Michigan: The 2019 reform introduced requirements that territorial rating differences be substantiated by loss data, and it prohibited certain ZIP-code-based surcharges in Detroit that regulators found were disproportionately large relative to loss experience.
• New Jersey and Maryland have both conducted market conduct examinations focused on territorial rating practices in minority-majority urban areas.

If you're being quoted dramatically higher rates than a comparable driver in a neighboring ZIP code, it may be worth filing a complaint with your state's Department of Insurance — particularly if you suspect the difference isn't driven by actual loss data. You can also compare your state's minimum requirements and baseline rate structures at the state-by-state auto insurance requirements hub.

How to Use This Information Practically

Knowing which factors your state restricts gives you leverage — but only if you act on it. Here's what to actually do with this information:

1. Check your state's DOI website. Every state has a Department of Insurance with a public-facing rate filing database. You can look up what factors any licensed insurer in your state is approved to use. It's dry reading, but it's authoritative.
2. Request a rating worksheet from your insurer. Insurers are generally required to provide a breakdown of your rate upon request. If you're in California and you see a line item that looks like a credit-based adjustment, that's a compliance issue worth escalating.
3. Compare quotes across carriers, not just prices. If your state bans credit scoring, then two carriers should be working with the same credit-blind data set for you. Large price differences between carriers in a restricted-factor state usually come down to how they weight permitted factors — which means shopping around has a real payoff.
4. Understand that banned factors still affect pricing indirectly. When a state bans credit scoring, insurers don't just remove the factor and refund the difference. They rebalance their rating models. Some drivers end up paying more because insurers spread risk differently. The net effect for your individual situation depends on your full profile.

For context on how credit behavior specifically ties into underwriting decisions — even in states where the score itself isn't usable — see how credit scores factor into insurance underwriting. And if you want to understand how credit-based insurance scores differ from the FICO score your bank uses, this explanation of how credit scores affect premiums in most states covers the mechanics clearly.