Congress Investigating Insurance Use Of Credit Scores
Friday September 28, 2007
You may be aware that insurance companies use credit scores to gauge your risk as a driver. A low credit score could cause you to pay more for your insurance premium.
Why are insurance companies using credit score anyway? Bobbie Sage, About Guide to Personal Insurance, says that insurance companies believe there's a correlation between the way you pay your bills and the way you drive.
There are allegations that the use of credit scores in the insurance industry is discriminatory against people of certain races and economic classes. Congress is conducting a hearing next week to decide if insurance companies really should be using credit scores.
Personally, I don't believe credit scores are indicative of a person's driving habits. I believe a person's driving history is indicative of their driving habits. Not only that, there are people whose low credit scores did not result from irresponsibility, but from financial difficulties out of their control. To raise insurance premiums based on credit history only increases the financial burden for people who are already overwhelmed.
Read: Committee to investigate insurers' credit-score use
Why are insurance companies using credit score anyway? Bobbie Sage, About Guide to Personal Insurance, says that insurance companies believe there's a correlation between the way you pay your bills and the way you drive.
There are allegations that the use of credit scores in the insurance industry is discriminatory against people of certain races and economic classes. Congress is conducting a hearing next week to decide if insurance companies really should be using credit scores.
Personally, I don't believe credit scores are indicative of a person's driving habits. I believe a person's driving history is indicative of their driving habits. Not only that, there are people whose low credit scores did not result from irresponsibility, but from financial difficulties out of their control. To raise insurance premiums based on credit history only increases the financial burden for people who are already overwhelmed.
Read: Committee to investigate insurers' credit-score use
Comments
Amen! Employers are doing the same thing
before hiring people. They seem to think the same way.
You go LaToya! I personally believe insurance companies are the cause for most of society’s ills and this is just one indication. They are greedy and could care less about the people they “insure” and less about those they don’t.
It is discrimintory. A divorced single guy who makes a lot of money could be a guy who stop by the local bar two or three times a week and drives home tippsy. That is risky. His ex-wife, now a single working mother of three may be a very safe driver, pays her bills, but has a high debt ratio. She is then penalized because she simply has greater responsiblities than her x-husband.
I totally agree and it is discriminatory. As my husband always says “follow the dollar” and you will see why something is done the way it is.
Ironically, my credit is good and my husband’s is lousy. We have recently gotten a cut in our car insurance, which I questioned. Seems my car insurance may not only look at my credit, but how I pay on time–especially my insurance payments. I don’t know what they think about my husband’s lousy credit and the fact he’s been frequently late with payments on his credit cards…he doesn’t make the insurance payments, or write the checks, I do.
Still, I agree that the amount of debt is not an indication of the type of driver one is. But maybe it does indicate if the insurance company will get their money from the customer on time. I don’t know….
If jobs and insurance companies continue to be allowed to use a persons credit report to judge how well they will drive or how well they will work those people who are the working poor will never get ahead. I’m a shamed to think what would happen if The recently divorced mom of 3 lost her job and couldn’t find another job or insurance because companies where judging her on her credit report.
It’s about time legislation saw the light as to what insurance companies are doing to the American people, whether they are minorities or not. To base your insurance premiums on your credit score is ridiculous. It should be solely based on your driving record. Period. And I also agree that a person should not be judged by their credit score/report when applying for a job. Everyone with not so perfect credit has circumstances that were beyond their control (like divorce)and a future employer should not be allowed to even pull up your credit report just to pre-judge you based on just that. You are trying to get a job, earn money and better yourself. That should say something right there. Again your past employment performances should be looked at just like your drviing history.
My husband and I just got a notice regarding our homeowners policy stating that due to poor credit our rate was going up. I don’t understand how my credit is affecting this since our payment for the mortgage hasn’t been late and we pay the insurance as an automatic payment each month that they withdrawal. We haven’t missed a payment, nothing. We don’t have PMI, so I don’t get why they think they need to charge us more simply because we are going through a rough patch right now with stupid credit card companies.
I just received my renewal for my car insurance it went up about 14% 1806.07 to 2063.07 i have 3 cars no tickets or accidents for over 3 years. When I contacted my agent he said it was based on my credit score. I told him that it was unfair I have had insurance for over 20 years and just because I am having a rough time with my credit (lost job in 04/2006 present job making less the before)To base your insurance premiums on your credit score is ridiculous. It should be solely based on your driving record. I really feel like I am being discriminated against because of my credit scores.
There is nothing like a group of uninformed people being the judges of what is fair and what isn’t.
Well if you don’t think there’s a correlation well then there must not be since I am sure that you have seen all the data and made an informed decision. What? You haven’t looked at any data?
Insurance companies have earned their distrust over the years but please don’t guess what characteristics have a correlation to actual risk since none of you would put your money where you mouth is if presented with insuring a group of people with really bad credit. You would have to look at the actual data in order to make such a decision.
Keep those blinders on eveyone and see what you want to see.
Sean (#10):
I have asked for the algorithms and methodologies from the insurance companies and been stonewalled at every attempt. I have advanced degrees in mathematics and engineering and am more than capable of performing the analysis you say we are not doing. Maybe it is you who should take the blinders off.
Oh yeah, forgot to mention that I’ve had my homeowner rates raised by 35% on the basis of one of these BS “analysis” and I have outstanding credit..not missed payments, “Super-premium” rating by experian and am in a very high tax bracket. The reason given is essentialy that I don’t use credit cards. Please explain this in your context of “insuring people with bad credit”.
Well said.
Thank you Brian. It is just another way for greedy insurance companies to suck more money out of people. Has anyone noticed who owns the biggest buildings around? Insurance companies. They take and take but when it comes to paying they won’t do it unless you take them to court. When they do pay they just raise your rates and make you pay for it. Why people have insurance is beyond me.Just put your money in the damn bank. Seems to me when you are put between the law saying you must and the insurance turning the screws it’s time for the people to start doing something about it. It’s a long time overdue for the government to control these companies and protect the poor. I think we the people need to stop acting like a nation of sheep and start a class action law suit if the government just keeps looking the other way while the poor are being raped.
If they are going to use your credit score to determine your rates, maybe they should report people who pay there rates on time to the credit bureau. This may help improve some peoples credit score.
Insurance is not “Revolving Credit” You pay every month and are covered for that month. If you don’t pay they cancel it. Lets all remember how the industry of “Insurance” and “collection agency’s” all came about. They both were started by the mob. Only the called it “Protection” and “Recovery” Both terms that both industry’s use. My Insurance company at the beginning told me they would pull my credit for premiums based. I have very good credit. I told them I will go elsewhere then. They were not loaning me money it was not there business about my bills. We are all pushed into a corner. Every state requires you to have auto insurance and the insurance companies take advantage of that and make more $ off of us.
@James, I agree that if they’re checking your credit score to determine your rate, they should also be reporting your timely payments.