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States are taking a second look at how credit scores affect car insurance rates

Rottweilerlvr
New Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

I'm on the side where I don't believe credit scores should factor into car insurance. My credit took a nose dive after my divorce in 2015, not my driving. I haven't been in a accident in over a decade, speeding ticket in over 12 years- basically nothing on my driving record. Cops would love me if they knew me, but alas I don't get pulled over to meet any. There were times I simply couldn't afford insurance because it was too high. It was insure my car or feed my baby at times right after the divorce... Not something any mother should have to choose. In my case, I feel my low score was a way to make a profit.. Can you imagine how much State Farm has made off me? I wouldn't even know how to file a claim.

Message 11 of 37
kkboom
Frequent Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

I agree with others who don't think credit should impact insurance scores.

 

My reasons are likely different than their reasons though so I won't call out any names. I'm going to add, I have no problem with the article or that it was posted. 

 

I can agree that perhaps there is a correlation with credit scores and vehicle accidents as was pointed out up thread. I also believe that a model that uses credit scores as a factor has a disparate impact on (insert thing we don't talk about). My position is, if the latter is true then application based on the validity of the former is simply unjust.  I think you stick to driving. 


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Message 12 of 37
KatSoDak
Frequent Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

My DD moved from a city in North Dakota to a rural county in Florida a couple years ago. Her Fico score is much higher now but her insurance premiums are also MUCH higher in Florida. Same car.

 

Supposedly 26% of Florida motorists are uninsured. That of course affects rates. 

 

She was offered a device to monitor her driving for 3 months to help control rates. It measured if she slammed on the brakes or came to a controlled stop. When she braked hard a signal was sent to the insurer I guess. I rode with her a couple times when she had the device installed and DD would flinch when she had to brake hard and the device signalled. She gave it back at the end of the trial period. Even though this was through Progressive I bet it's similar to the Root program mentioned in the link in the OP.

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Message 13 of 37
Flfico
Regular Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

Very interesting article. Thank you for sharing op. One thing I would like to add is that while insurance companies set their own UW rules and rates, they do have to submit it to the state for approval. If a company provides someone with a good credit score a discount they need to have the data to back up their claim that someone with a good credit score is a better risk. Is it 100% accurate? Absolutely not. Is it fair? That's certainly debatable. At the end of the day, all businesses have to make money. If they made a change like this people with a lower credit score may get a better rate but they will have to recoup that money somewhere.

Message 14 of 37
coldfusion
Community Leader
Super Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@Rottweilerlvr wrote:

@coldfusion wrote:

@CreditCuriosity wrote:

I respect your opinion and others that credit shouldn't play a role.  Just keep in mind if credit is removed the cost will get passed on one way or another as it still cost x amount of money to be profitable as a company.  1 bad risk can take the profit away from 1000 good risks and make an insurance company leave said market area.  Company I work for are in the process of leaving certain markets due to we simply cannot make money due to many reasons in said market.  Less competition usually is worse ultimately for the consumer.


I don't want to get too close to the red line here and there were multiple factors in play, but this is what happened in Massachusetts with many carriers pulling up stakes and no longer offering auto policies.  There have been some changes made and a few carriers have re-entered the market but for a while there weren't very many options.


I don't blame them. I feared for my life driving through Boston.. 


You don't "drive" in Boston.  You aim your car and step on the gas. Bonus points if you frighten multiple pedestrians.



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Message 15 of 37
Taurus22
Valued Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@coldfusion wrote:

@Rottweilerlvr wrote:

@coldfusion wrote:

@CreditCuriosity wrote:

I respect your opinion and others that credit shouldn't play a role.  Just keep in mind if credit is removed the cost will get passed on one way or another as it still cost x amount of money to be profitable as a company.  1 bad risk can take the profit away from 1000 good risks and make an insurance company leave said market area.  Company I work for are in the process of leaving certain markets due to we simply cannot make money due to many reasons in said market.  Less competition usually is worse ultimately for the consumer.


I don't want to get too close to the red line here and there were multiple factors in play, but this is what happened in Massachusetts with many carriers pulling up stakes and no longer offering auto policies.  There have been some changes made and a few carriers have re-entered the market but for a while there weren't very many options.


I don't blame them. I feared for my life driving through Boston.. 


You don't "drive" in Boston.  You aim your car and step on the gas. Bonus points if you frighten multiple pedestrians.


Lol @ this! Smiley Very Happy  Smiley LOL

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Message 16 of 37
Dinosaur
Moderator Emeritus

Re: States are taking a second look at how credit scores affect car insurance rates

Time to speak. Interesting thread! My experience was chasing the massive savings we see advertised. Learned a few things.


People in their age band of 60s+ were rated at the level of those aged 26 and under (blew my mind - likely not every company). Shopped 17 companies. Did save $490 dollars but got a notice from the insurance company that they could NOT offer me their best rates because of my total credit picture. I went what? Sit at 850 FICO 8 for EX EQ and TU? Obviously there are other credit scores and miscellaneous information collectors involved.

 

Live rural and still think my rates are high! Clean record I might add. Smiley Frustrated

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Message 17 of 37
GatorGuy
Established Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@CreditCuriosity wrote:

@Taurus22 wrote:

For those like myself who agree that Credit Scores have absolutely nothing to do with your ability to drive safely....

 

https://www.yahoo.com/news/move-underway-cut-credit-car-083008058.html


I work in insurance although not auto, but many friends do work in auto insurance as actuaries and the likes and credit does play role whether people like it or not.  They would have to disagree with this assessment Smiley Happy.  There is a correlation of risks although obviously not always the case it has been shown.  Many other factors obviously go into pricing risks (insured) other than credit, credit is just of one of many things considered.  

 

Edit: also to note this articles touches on alot of things that can't be spoken about on this forum as just read it after my initial response just by topic.  So please avoid discussing the obvious things in this article that shouldnt be discussed on this platform.


Obviously there is a solid correlation which is why insurance companies use credit score as a proxy for risk. However, we also know other factors correlate with risk as well: age, maritial status, home ownership, parents, and some protected classes and thus cannot be used for risk strateficiation.  

 

But just because something is useful and effective, doesn't mean it should be used. Especially when it is something not easily changed and significantly unrelated. I say this as someone likely benefiting from the current process. My wife and me have speeding tickets on our record, but have excellent credit history. 

Message 18 of 37
Save-n-Invest
Established Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

Insurance companies are underwriting risk. Responsibilty could factor into risk. A decent credit score shows responsibility. I get multiple discounts for the cars. My most recent billing stated that consumer reporting bureaus played a part in my rate. 

 

Seems today everything in the news relates back to some of the things we don't talk about. It's difficult for me to actually believe this. Responsibility is reponsibility. 

Message 19 of 37
LawStudentCivilis
Established Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@Save-n-Invest wrote:

Insurance companies are underwriting risk. Responsibilty could factor into risk. A decent credit score shows responsibility. I get multiple discounts for the cars. My most recent billing stated that consumer reporting bureaus played a part in my rate. 

 

Seems today everything in the news relates back to some of the things we don't talk about. It's difficult for me to actually believe this. Responsibility is reponsibility. 


Boy you walked right up to the line and stuck your toe across.  Interesting commentary on this forum that you felt it would accept such a dog whistle.

Message 20 of 37
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