Ever wonder why your neighbor with the same car pays less?
I was at a cookout last summer. My neighbor Dave was complaining about his auto insurance. He drives a 2018 Honda Accord, clean record, good credit. His premium had gone up about 15% for no reason. Across the street, another neighbor with the same car, same age, same driving record, was paying about 20% less. Dave was furious. “How is that fair?” he asked.
I told him it probably wasn’t fair. But it might be legal.
Insurance companies have been using algorithms to set prices for decades. But the new generation of AI underwriting models is different. They can analyze thousands of data points – your shopping habits, your social media activity, your marital status, your education level, your credit card usage, even your web browsing history if they can buy it from data brokers. Some of these factors are correlated with risk. Some are just proxies for things they’re not allowed to ask directly.
The NAIC – National Association of Insurance Commissioners – passed a model law on AI transparency in late 2025, give or take. Illinois hasn’t adopted it yet as of 2026, but it’s under consideration. The law would require insurers to disclose the key factors that affected your premium – not the full algorithm (trade secrets), but enough for you to understand what you could change to lower your rate.
So what does this mean for you right now? And how can you use the law if it passes?
First, let me explain how AI underwriting works in auto insurance. Traditional models look at: your age, driving record, years of experience, vehicle type, annual mileage, zip code, credit-based insurance score, and prior claims. Those are all allowed in Illinois. AI models add layers: your payment history on other bills (utilities, phone), your shopping patterns (do you buy generic or name brand?), your online behavior (do you research safety features before buying a car?), and even your social media presence.
Some of these factors are predictive. For example, people who pay their credit card bills on time tend to file fewer claims. People who drive safer cars tend to have fewer accidents. But other factors are just proxies for things like income or education – which are not supposed to be used directly, but can be inferred from other data. That’s where fairness concerns come in.
The NAIC model law has three main parts.
First, insurers would have to submit their AI models to state regulators for review. Regulators would check for unfair discrimination – not just racial or gender discrimination, but any factor that disproportionately harms protected groups without a strong actuarial justification.
Second, insurers would have to provide a “notice of adverse action” that explains the key factors that led to a higher premium or a denial. Not just “credit score” or “zip code” – but more specific, like “your credit score was 680, which is below our threshold of 700, because you have high credit card utilization and a late payment from 2024.”
Third, consumers would have the right to dispute inaccurate data used in the algorithm. If your credit report has an error, or your driving record is wrong, you could challenge it and force the insurer to re-run the model.
These are good steps. But the law doesn’t ban the use of AI. It just adds transparency.
So how can you use this information today, even before the law passes?
First, know what data is being used. Order your credit-based insurance score from the bureaus. Get a copy of your LexisNexis Consumer Disclosure Report – that’s a database that insurers use to check claims history, driving records, and other factors. Review them for errors. I’ve seen people with old addresses, incorrect accident reports, and even claims filed by strangers with the same name. Fixing these errors can lower your premium.
Second, improve the factors you can control. Pay your bills on time. Keep credit card balances low. Drive safely. If you have a telematics device or app, drive during low-risk hours and avoid hard braking. Some insurers offer discounts for safe driving that can override other negative factors.
Third, use the Auto Coverage Optimizer to see if you’re in the right coverage levels.
Fourth, shop around. Different insurers use different algorithms. One might weigh credit heavily. Another might weigh prior insurance history. A third might use telematics to give you a personalized rate based on actual driving. You don’t know which algorithm likes you until you get quotes. I’ve seen people save about $600 a year by switching to a carrier that didn’t penalize them for being a renter or for having a thin credit file.
I remember a woman named Elena. She was a teacher, great driver, but she had no credit history – she paid everything with cash. One major carrier quoted her about $1,800 a year. Another carrier, which used a different algorithm that didn’t rely on credit, quoted around $1,100. She switched. She saved roughly $700. She told me “I didn’t know credit mattered that much. I’m glad some companies don’t use it.”
The Coverage Gap Calculator can help you see if your current carrier is treating you fairly by comparing your premium to state averages.
Now, what if the NAIC model law passes in Illinois? Then you’ll have new rights. You’ll be able to request a detailed explanation of why your premium is what it is. You’ll be able to dispute inaccurate data. And you’ll have more use when shopping.
But don’t wait for the law. You can take action now.
First, request your consumer reports from the major data brokers. LexisNexis, Verisk, TransUnion, Experian – all have consumer disclosure processes. Check for errors. Dispute anything wrong.
Second, if you’re denied coverage or given a high premium, ask the insurer for the specific reasons. They might not give you the full algorithm, but they’re required to provide the “key factors” under the federal Fair Credit Reporting Act if they used a credit report. Use that right.
Third, if you believe you’re being discriminated against, file a complaint with the Illinois Department of Insurance. They have the authority to investigate.
Fourth, consider using a telematics program if you’re a safe driver. Telematics can override other negative factors by showing your actual driving behavior. I’ve seen people with poor credit get great rates because they drove like saints.
Someone I worked with – let’s call him Frank – had a low credit score due to medical debt. His premium was $2,400 a year. He enrolled in a usage-based insurance program. After six months of safe driving – no hard braking, no late-night driving, low mileage – his premium dropped to $1,600. The telematics data proved he was a low-risk driver, overriding the credit score penalty. He told me “the device is a little creepy, but it saves me around $800 a year.”
That’s the future of auto insurance. Less reliance on proxies like credit and zip code. More reliance on actual driving data. But that future is not here yet for everyone. Until it is, you need to manage the factors you can.
Here’s your action plan.
One, get your consumer reports and correct errors.
Two, improve your credit-based insurance score – pay bills on time, lower utilization, avoid new credit inquiries before shopping for insurance.
Three, shop around every two years. Different algorithms = different prices.
Four, consider telematics if you’re a safe driver.
Five, if the AI transparency law passes, use it to demand explanations and dispute errors.
Dave – my neighbor – he ended up switching carriers. His new premium was about $1,500, down from about $1,900. He still doesn’t know why his old carrier was charging him more. But he’s not overpaying anymore.
That’s the bottom line. You may never know exactly how the algorithm works. But you can still beat it by shopping, cleaning your data, and improving your risk factors. And if the law passes, you’ll have even more power.
P.S. Elena – the teacher with no credit – she now tells all her colleagues to shop around. “Don’t assume your current company is giving you the best rate,” she says. “They’re not.”
By Marcus Whitfield
