Do you know that many auto insurance companies base your rate on your Credit Score>? Should this be legal>?

Question

I just feel that if the State is going to require by law auto insurance ,, then your credit should not have anything to do with your rate! Many companies don't even tell you they are running your credit, but they do! This needs to be changed !

what's next they going to charge us what the wish on our next Big Mac based on our credit score?

Answer 1

First off, I have been a claims adjuster for 20+ years. Using a credit report to help determine rates is pure BS. As another poster stated many people with good credit suck at driving. Their the ones who are wealthy and too busy to pay attention while driving.

I have investigated 1000's of accidents and there is absolutely no correlation between bad credit and bad driving. I agree there is a correlation between good credit and the insurance company getting paid on time. That is their main concern. Using the credit report crap to charge higher rates is just a bonus to the company.

And folks let's be clear about the myth that insurance is required in all states. It is NOT!! It certainly should be but it is not.

People who are not in the insurance game (like nan6872) assume that insurance is required in all states because that is a logical conclusion, except when dealing with insurance and vehicle laws there is not much logic applied.

There are many states that do not require mandatory insurance but instead require "financial responsibility". For example I handle a lot of claims in Wisconsin. There are tons of insured drivers there drinking their great beer and driving home. Insurance is not mandatory there, however if you have an at-fault accident while uninsured the Dept of Transportation will revoke your license and registration if you do not sign a contract to repair the damages you are responsible for.

Answer 2

The basis of this practice, is that, the industry feels those that have poor or less than average credit ratings, are a risk as drivers overall. Just like how they separate the young male driver, under 25, that their statistics have shown that they cause more wrecks than the norm. I feel the stats for young men is probably pretty accurate, most teenage guys can't wait to get the fastest car they can afford, and they do tend to get into more trouble then the norm. I do not understand how your credit rating should effect your driving skills. Many people suffer a bad credit hit, without cause on their part. Someone may have cancer, for example, payments for treatment are huge, and naturally all your medical bills could back up, causing late payments. To say that, because of a medical situation, I have to pay higher insurance rates, is totally asinine! This regulation should be changed, I totally agree.

Answer 3

It sucks but that's the way it is. The industry has determined that there is a direct correlation between low credit scores and insureds performance and low scores equal higher pay outs for the company so they want higher premiums for higher risk. Also in a few states like Vermont you dont have to give your social # but then you get declined so basically your stuck. As for the prior post about self insuring. You have to prove substantial assets and it has to be certified by a judge and the state. We are talking about multi-millionaires.

Answer 4

I agree that it should not be legal to check the credit rating. A person's CR has absolutely nothing to do with driving ability. Check out the driver ability of some of those in the fancier cars.

And to the previous poster...not sure what state you are fortunate to live in, but in my state and EVERY OTHER STATE I have ever lived in, you are required BY LAW to have insurance, at least liability.

So, are the government and insurance companies in with each other? You tell me.

Answer 5

I totally agree...in my opinion, insurance is legalized extortion.

The reason why they do it has nothing to really do with your credit or your ability to make your premium payment. Its all about their perceived risk. In their view,people with low credit scores are desperate for money,thus making them more likely to have an "accident" and make a claim.

I would like to see the statistical data to back that up. I am sure it happens in some cases,but not all. It is like someone else said...that government lets the insurance industry do pretty much what they want.

Oh and Clevis... I dont know what fantasyland you live in,but every state in the union requires that you have insurance or your vehicle registration is suspended.

Answer 6

Only in the US. In Canada, insurance companies are prohibited from using your credit rating/score to determine auto insurance rates.

Answer 7

They do tell you, you just aren't listening. Listen for "financial responsibility" instead of credit. In fact, they have to tell you - it's a law.

Stats show that people who have a good payment history (shown on their credit report) are in less accidents (therefore, they receive lower rates)

Guess what? Your department of insurance knows this practive and allows it. If you want it to be changed, write to your deparment of insurance. Find them by Googleing "deparment of insurance and YOUR STATE"

Answer 8

maximum businesses are employing very complicated score strategies that comprise the credit as area of the score. i grow to be not conscious that it might desire to reason that lots of a shift interior the top rate however. one element i understand is that private line expenses (house vendors coverage and private vehicles) are going up perfect now. That develop blended mutually with your credit subjects may be what's inflicting the better expenses. in case you have your coverage by using a broker provider, have them go searching and value you with different businesses to verify what happens. while you're with a captive agent (meaning they only paintings with one organization) ask some acquaintances for solid references and discover an self sustaining agent to grant you some expenses. some states have already exceeded rules banning the score technique. there are various coverage departments and legislators that are reviewing whether or not they might desire to enable using a credit to affix an coverage fee. in case you prefer to help out their learn, provide you senator/representative a call or digital mail and enable them to understand the way you experience as properly.

Answer 9

The DOI in CA has banned this practice as it is deemed discrimatory. I don't know if discrimatory is the correct word, but it certainly isn't right. I know plenty of people with "good credit" who are consistently in accidents, consistently file homeowners claims, and I know plenty of people with "bad credit" who have never filed a claim of any sort in their life nor have they been involved in an accident, at fault or not. I've read the studies on this issue, and the theory that people with bad credit are higher risk individuals than those with good credit, in my opinion, is a bunch of b.s.

Answer 10

Yes, I knew it. Nothing new about it, a credit score tells a lot about a person and is one of the things they check to set your rates.

They certainly don't keep it a secret that your credit score will be run, and your driving record will be looked at also.