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Root believes that as more drivers get comfortable with using their actual driving data to inform their insurance rates, the industry can wean itself off using credit scoring, which tends to negatively impact “under-resourced communities, immigrants, and those struggling to pay large medical expenses,” the company says.
“There are so many aspects of credit scoring that are inherently biased, with no causal impact on driving risk,” says Tom Kuhn, director of communications for Root Insurance.
Internally, Root sees 2025 as the goal date to remove the credit scoring model from its underwriting process. It’s slow going because there’s a great deal of trust associated with the scores that isn’t quite at the same level as telematics data, Kuhn says, and it will take time to convince all regulators that this leads to fairer pricing.
“It’s a state-by-state basis, we have to put the rates in and bring regulators along with us and understand the value of not using credit scores,” Kuhn says. “The potential impact on our policyholders is something we’d like to phase in over time as well.”
Root generally gathers its own driving data using a mobile app. However, it also recently partnered with LexisNexis on Telematics on Demand, through which the carrier can get enough data at the time of a quote from customers who have opted in through their car’s onboard digital platforms to share their data for insurance purposes. This removes the need for a test drive.
Kuhn says that the opt-in nature of the program, as well as the clear line between how a person drives and their rate, will increase the trust between insurer and insured.
“There’s an impetus on the insurance companies to demonstrate the value, and how this has an immediate impact on your life,” he says. “Let’s say you finish and get a rating on how well your drive was. People trust that, they see how this data was used, and can help them be better drivers.”
