Regulators move to study racism in insurance industries. Experts say it’s not enough.

A prominent group of insurance regulators on Tuesday agreed to examine more closely the use of credit scores by companies in pricing auto insurance, an incremental step toward reining in a practice many experts say amounts to a form of economic racism.

Yet, a larger number of activists at the state and federal levels pushing to ban the practice outright say the move falls far short of the progress on racial issues promised by the insurance industry in the aftermath of the murder of George Floyd last summer.

“Last year, they said, ‘Let’s make a plan to do work on this,’ and here we are a year later, and all they’ve done is vote on the subjects they hope to cover,” said Doug Heller, an insurance expert at the Consumer Federation of America, a nonprofit advocacy group.

The National Association of Insurance Commissioners, a nongovernmental regulatory body that guides the insurance industry, voted unanimously Tuesday to adopt a broad series of measures to study the underlying causes of racial discrimination in the industry, including how the use of credit scores in determining rates disadvantages people of color.

That followed a vote Sunday to approve the measures by the NAIC’s Special Committee on Race and Insurance, which launched in July 2020, in response to Floyd’s murder, as corporations and industry leaders joined the national conversation on how to address systemic and economic racism.

Among the items adopted were a binding measure for commissioners to “continue research and analysis of insurance, legal, and regulatory approaches to addressing unfair discrimination, disparate treatment, proxy discrimination and disparate impact” — including the reliance of auto insurers on formulas that include credit scores.

The measures also call for commissioners to develop “analytical and regulatory tools” that would help the industry scrub itself of the practice of setting higher rates, including auto insurance rates, based, in part, on a person’s credit, where a person lives, what level of education a person has completed and what job a person holds — all factors that result in people of color paying higher premiums.

The NAIC tasked the committee with making recommendations “for statutory or regulatory changes,” although a timetable for such action was not set — an omission that prompted the harshest criticism from consumer advocates.

“It’s more of a wish list of activities than a systematic approach to examining and addressing issues of race and insurance,” said Birny Birnbaum, the executive director of the Center for Economic Justice, a left-leaning consumer advocate group that studies insurance issues. “The charges range from specific tasks to broad investigations with no distinction about the breadth of the activity and fail to specify time frames for delivery.”

Birnbaum, Heller and several others said they’d prefer to have seen draft model legislation that explicitly addressed bias and that outlawed variables that are discriminatory.

Large auto insurance companies and trade groups have routinely defended their credit-including formulas, claiming it’s part of a more comprehensive, risk-based methodology based on research they say shows that better credit correlates to fewer claims and accidents.

Spokespersons for Progressive, Allstate, Liberty Mutual and State Farm — the four largest auto insurers in the U.S. — did not respond to questions from NBC News.

A growing number of states have sought to ban the reliance of auto insurance providers on credit-based pricing, but states’ ability to do so hinges on specific regulations that govern what factors can and cannot be considered by insurers in determining rates.

Washington Insurance Commissioner Mike Kreidler, who earlier this year banned the use of credit-based pricing in the car insurance industry for three years by emergency executive action, said that’s why the measures adopted are, despite “legitimate” criticism, meaningful.

“This is an industry that has ignored the issue for years,” he said. “For NAIC to put a working group together and come back with anything, that’s progress.”

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