Should insurance companies use your credit information?

Question

http://badboyd.blogspot.com/2007/01/sharin-credit-with-medical-info.html

Answer 1

As much as they should use your claims history.

So, if you feel claims history, health, gender, age, type of car, and all the OTHER rating factors which are proven to have a link predicting future claims are unethical to use (ie, you want everyone in the US to pay the same rate, no matter what), then you can lump credit history in with that.

Answer 2

While the argument is that people with lower credit scores file more claims, I'd argue against using credit score. What if people file more claims when their credit is low because they live in situations where they have more stress or because they live in poorer conditions? What if the real risk is not a low credit score at all, but something else and credit score is not a "true" reflection of this kind of risk? I think the use of credit score as a "risk" factor is a way to discriminate (subtly and carefully) against those who have less money.

If the issue is "irresponsibility", I'd like to have insurers find another "characteristic" of the person that more accurately reflects this. If the issue is potential "criminality", I'd like the insurer to find a characteristic that more accurately. Not every person who has a low credit score is a budding fraudster.

Answer 3

Absolutely not. In some states, like CA, this is discrimination.

As someone who was forced into bankruptcy due to identity theft...I have serious problems with this. I pay my bills, have a perfect driving record (1 ticket when I was 18, 1 non-fault accident 6 yrs ago & I've been driving for 19 years)...yet some idiot out there thinks b/c I filed for bankruptcy I'm a higher risk because of it. Hogwash!

I know plenty of people with "perfect credit" who get into accidents several times a year, have their "house broken into" several times a month, and who have "lost their wedding ring" several times in during their marriage....yet I'm a higher risk. Whatever.

Your credit is not a predictor of anything....your credit can change in an instant. Your claims history however, doesn't change.

Answer 4

An insurance company, in most cases is a business, started to make money. There are financial responsibilities to the shareholders, owners, or corporation regarding profitability. If they use credit scores as a predictor of whether you will be able to pay your premium, or whether you will file a claim, I think they are doing what is best. They may charge a little more, but they are covering their responsibilities.

Answer 5

Absolutely not but in today's world they have to run a credit check on you to see if you are a moral risk. Like planning on having your car stolen or house burn down because you have so many bills, etc. But your credit has to be private and go no further than the insurance company.

Answer 6

they do use credit information as an underwriting tool. this is not necessarily for your ability to pay premiums on time, but it is more cost effective for the company if you pay your premium and they dont have to handle late payments or lapses in coverage.

they use the credit info mostly for a guideline to try to determine if you will present possible fraudulent claims for thefts, fires, etc....

it is a fact that around the holidays, the frequency of fraudulent theft claims does go up drastically. people who are tight on money are more likely to present a fraudulent claim. also, people who are about to go through a repossession are more likely to have an auto theft or fire.

the insurance industry has also been trying to allow more attractive rates to people w/ higher education and white collar professionals. but in most states, the state insurance commissioner will not allow this as an underwriting guideline.

Answer 7

Absolutely. It has to do more with the likelihood of you filing a claim then your ability to pay premiums. People with low credit scores tend to file more claims with then people with high scores. The high score people generally are more financially stable and will just pay to have things fixed rather then have the insurance company take care of it. Its just the way it is.

Answer 8

Should they be able to determine if you are going to be able to pay your premiums? Yes

Will they only use it to determine if they can pay your premiums? No

Is there a way to give them the information they should be able to have without it being used in ways they should not be allowed to use it? No

This issue is called 'scope creep' or 'mission creep'. Its all over the place.

Mandatory Seat Belt Laws: Originally, people get pulled over if they are not wearing seatbelts to encourage seat belt use. Now its a justification for searching the person and the car for narcotics - seatbelt gets you pulled over - cop says "I smell something" - can you prove the cop DIDN'T smell something? No so he didn't violate the 4th amendment... according to a court even if nothing is found - that's guilty until proven innocent rather than innocent until proven guilty.

DCMA - Originally, a way to protect intellectual property. Now its used to quell free speech and to prevent competition. EX - leximark changed their cartridges to include a simple encryption routine so makers of after market cartridges for their printers would either have to stop making them or violate the DCMA to continue making them. - its not illegal to make the cartridges but it is illegal to have the equipment and knowhow to do it. Nice end run.

DRM - Orrigionally, a way to protect intellectual property. Now used on DVDs to prevent you from avoiding commercials by disabling the ability to skip on your remote control.

Broadcast Flag - Originally ment to prevent people from saving certain programs to prevent said people from publishing them on their own. Now, moving to all programs have the broadcast flag - effectively circumventing the Sony/Betamax decission without actually violating it.

PATRIOT act: Originally, an idea to prevent and detect terrorism. Now is can be used to quell political opposition, censor opposing viewpoints, etc.,... As someone who doesn't agree with people in charge can easily be labeled a terrorist without public trial, evidence or any of that legal stuff that just gets in the way.

Parking tickets: Originally meant to discourage parking in areas that might cause congestion or danger. Now used as a funding system that cities depend on to make budget.

These are just a few examples, but I'm sure you get the idea. Do you think an insurance company, when profits are on the line is going to use information it has ethically when doing so is less profitable?

Answer 9

Yes ... they need to know if you can pay the preimum and that your not a deadbeat or planning on doing some kind of fraud against them.

Answer 10

No. What does your credit have to do with what kind of driver you are? But I can guarentee you that they probably use this and allot of other information that we are not aware of.