Auto insurance premiums based on credit scores. Then why aren't credit scores based on driving records?

Question

I don't know about other states but in Mi. auto insureance premuims are based mainly on credit scores. I can't quite figure out if some one falls behind on there bills it makes them a bad driver. Etheir your a good driver or your not.

Answer 1

It is called junk science at work.

They get statistics from various areas about peoples credit ratings with out regard to job conditions in those areas or much anything else.

Such as variable housing loans, which can skyrocket in an instant with interest, rate increases leaving even the most responsible person behind before they know what happens.

Alternatively, the factory down the street closing putting them out of a job for a couple of months before they can find a new job.

Then of course that makes you a bad driver also even if you never have had any wrecks or tickets in your life.

Of course the insurance companies never market it that way to congress before laws like that are passed but instead use the time proven method of how it will save the children which all of the news medias love so much.

Really it can only be called science because of the scientific way researchers for the insurance companies go about to sway congress with lobbyist who manipulate them into making the insurance companies profits go up by providing legislation designed to protect them from ever having to pay out any claims at all if they choose not to.

And why should they when they have the all mighty government to pay it for them like in the instance of katrina. Oh did I mention the government was "YOU" the tax payer.....Seems like they always leave that out of the news media stories also.

Now along with not selling any policy at all to people with bad credit ....Hummm that describes a lot of people from the katrina tragedy.

Now they are making it where some people cannot get insurance therefore they can no longer legally operate a vehicle in that state along with own a house.

Oh unless you pay 5 times as much for not paying that $20 you owed to that cable company you never paid over there in New Orleans.

Yes just sign right here...It cost 5 times as much but over 20 years it goes down a little at a time as long as you make sure you pay that cable bill on time every time.

Junk science at work designed to fool all of the people all of the time is what I call it.

Call your congressman today and ask him what his problem seems to be and why he has seemed to lost track of reality and is now living in the junk science twilight zone beyond the outerlimits.

If he says no then it just proves what I am saying is true. He knows exactly what he is doing to benefit his own interest and could care less what you think.

Time to find someone that does care then.

Answer 2

1

Answer 3

Most states use credit scores to base premiums on. They also use driving experience, driving record, city you live in, and type of car. Some states use gender, grade point average for full time students, home ownership status, marital status, and how many miles you drive, when calculating the rates.

All these are factors affect how likely it is for you to have an incident with your car, or how likely it is for your car to get stolen; it's not quite so easy as "good driver/bad driver". If I drive a Ford Pinto, and I'm a horrible driver, I'm much less likely to have my car stolen than someone who drives a Ford Mustang Convertible, even if they're a fantastic driver.

Regarding the credit score, claims experience shows that people with a lower credit score have more claims, with higher payouts, than people with a higher credit score. Numbers that I've personally seen shown that 701 is the average "break even" point, where they pay out $1.00 for every $1.00 they take in premium, for a personal auto policy.

From an insurance company point of view, it doesn't matter WHY there are more claims with a lower credit score, just like it doesn't matter WHY young male drivers have more claims than young female drivers - just the fact that the relationship exists means that it's fair to charge more premium to the higher risk person.

Answer 4

i do not recognize if this is oftentimes in preserving inclusive of your credit, yet your credit is a aspect. i'm pulling this from reminiscence, yet I bear in mind a some analyze performed by an coverage organisation or coverage commerce team got here across that the fashion of claims is inversely correlated to a persons' credit. So once you've a weak credit you're extra in all probability to make a declare than once you've a intense credit. therefore someone with a weak credit has a larger correct cost. This sucks for individuals with spotty credit ratings because they do no longer have any debt!

Answer 5

Credit scores are easy to obtain nationwide. It is harder to collect driving data from 50 different states. Besides.....they know what you do with money.....STATISTICALLY speaking they can predict your other behaviors. Sure, there are thousands of exceptions. But the exceptions don't matter. Actuaries calculate statistical risks based on huge numbers of people, they don't predict individual behaviors. As long as a company is insuring thousands of people, it is simpler to deal with everyone in terms of statistical risk and not on an individual basis. Your credit score affects whether you can get a loan, what your interest rate will be (bet you didn't know that!) and even whether you can get a JOB!!!! Personally, I think THAT is completely wrong, but a prospective employer can do a credit check on you and then use the information to exclude you as a job candidate. They figure that if you have poor credit then you are not going to make a responsible employee. I think that's crossing the line, myself.
Moral......people, GET and KEEP good credit. It makes your life a lot easier.

Answer 6

Whom told you the above? While credit score is a factor, it is definetly not the primary factor in determining risk.

From the Michigan.gov site:

How are rates developed:

State law sets forth the factors that companies use when setting their auto rates. More rating factors are allowed for group policies than for non-group policies. Some of the factors that companies can use in setting rates include the type of vehicle you own, your driving record, your age or length of driving experience, where you live, and having multiple policies with the insurer (for example, both homeowners and automobile policies).

Answer 7

A credit score tells a company whether or not you have a good history of paying your bills. If so, you are a good risk for them to get paid. If not, they are gambling on whether you will pay them or not, as some with a low score will not. Businesses charge less to people who pay responsibly. Insurance cos too.

Answer 8

Maybe they figure that if you don't have a good credit score, you're irresponsible and if you're irresponsible with your bills, then you'd be an irresponsible driver, too. I do agree with you, though.

Answer 9

That's because the insurance companies figured out that they could charge people a lot more if they switched to an arbitrary system.

They do this to screw you over.

Answer 10

Sounds like a scam to me. Seems to me if you have a few late bills once in a while, you're running short on cash. If they raise your rates, how does that help YOU? That makes it harder to afford insurance...Hell drive without it (isn't that why I have to pay "uninsured motorist" in my policy?)