Where it sits in the insurer's process. NAIC says insurers primarily use these scores in underwriting and rating, and separates the two: underwriting determines whether a consumer is eligible for coverage at all, while rating determines the premium charged. The models are designed to predict the likelihood of future losses, and insurers use the resulting score to group consumers by risk and adjust premiums up or down according to the category assigned. How widely they are used is harder to state than it looks. On its topic page last updated in March 2026, NAIC reports FICO's own estimate that about 95 percent of auto insurers and 85 percent of homeowners insurers use them in states where the practice is allowed. Read that as what it is: an estimate produced by the company that originated the product, repeated by NAIC without a date of its own and with a geographic qualifier attached. It supports the claim that the practice is widespread where it is permitted. It is not a measured national rate, and nothing here treats it as one.
The legal limits are real and they are state limits. NAIC's position is that in most states insurers cannot use these scores as the sole reason to increase rates or to deny, cancel or refuse to renew a policy, that some states impose additional restrictions or prohibit certain uses altogether, and that many states also require insurers to notify consumers when credit information played a role in an adverse decision. NAIC maintains a state-by-state chart of those rules, which is the right place to look for a specific state rather than any general summary, including this one.
The federal layer is the Fair Credit Reporting Act, and it is more specific than most readers expect. The Act's definition of "adverse action" at 15 U.S.C. 1681a(k)(1)(B)(i) expressly reaches insurance: it includes "a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of insurance." Section 1681m(a) then requires anyone who takes an adverse action based in whole or in part on information in a consumer report to notify the consumer and to disclose, among other things, a numerical credit score used in taking the action. So a premium increase driven by credit information is an adverse action in the statutory sense, and the notice is the mechanism through which a consumer finds out that credit was involved at all.
The dependency that makes accuracy matter more than most people realize. A credit-based insurance score is only as good as the file underneath it. NAIC makes the point plainly: because these scores depend on the accuracy of credit reports, errors or outdated information can affect insurance outcomes, and when credit information contributes to an adverse decision consumers generally have the right to receive notice, review their credit report and dispute inaccuracies. A single misreported collection account can therefore raise the price of two unrelated products at once, and the correction route runs through the credit bureau rather than through the insurer.
The objections regulators themselves record. NAIC notes that regulators and consumer advocates question whether these scores fully reflect insurance risk, particularly after events such as illness, job loss or broader economic disruption that damage credit without making a claim more likely, and that critics argue the scores may disproportionately affect minority and low-income consumers and worsen affordability. NAIC also records the industry's position: that the scores let insurers evaluate risk more accurately, and that without them lower-risk consumers would end up paying more to cover losses from higher-risk ones. Both positions are on the same regulator page, which is a fair signal of how unsettled the question remains.
