Working in insurance I deal with this all day long, and I am curious what a lot of people think of this. Many people don't even realize that credit can and does affect your insurance rates in most states. Obviously it seems that people getting the best rates from the system appear very happy with it.
One of the problems I have is the fact that most companies are not going off of your ACTUAL credit score. For instance I have one client who has a credit score in the very high 700s but she is not getting the best "insurance" credit score. Apparently insurance companies use a completely different formula that is copyrighted and hidden so other companies can't copy it. Of course that means I have no way of telling my customers what they can do to improve their score. I have a theory that the amount of loans you have play a part because my own score worsened when I bought my first house and got my first mortgage.
Fortunately in the state of Maryland, a state law was enacted stopping insurance companies from raising your rate if you are already a client, but if your score improves the company must lower your rate. But I have some clients in Virginia where I have to explain that the reason for their rate increase was due to credit.
In many states insurance companies are even allowed to cancel your policy if your insurance credit score is bad enough.
On a positive side, it is working the way it is supposed to. Looking at the statistics in my agency the clients with worse credit scores are in fact having the majority of the accidents.
But as expected in any set of statistics there are many exceptions. The statistics mean nothing to someone with bad credit, but has been with us 20 years without an accident.
It also means that individual agents have started marketing in more higher income areas where their rates will be more competitive. This to me is just one step away from redlining, which is an illegal practice of refusing to do business in a specific geographical area typically with high proportions of minorities.
Posted by rivka (Member # 4859) on :
In what states is this practice not legal?
Posted by Artemisia Tridentata (Member # 8746) on :
Redlining is illegal in all states. It is a federal offense. That dosen't mean that it is provable and enforceable, however.
Posted by rivka (Member # 4859) on :
Sorry, I was unclear. I didn't mean redlining.
quote:Many people don't even realize that credit can and does affect your insurance rates in most states.
Posted by Stephan (Member # 7549) on :
Last I heard in Hawaii insurance credit scoring is illegal. Here in Maryland it is illegal to be used for homeowner's insurance. So the usage definitely varies state to state.
Posted by aspectre (Member # 2222) on :