Poll Shows That Most Mass. Voters Would Favor A Law Banning Car Insurance Companies From Using Credit Scores

Posted by erik devaney

Courtesy of autopistonmagazine.com

Should a driver with an impeccable driving record be forced to pay a higher auto insurance premium because of a sub-par credit score? A recent poll from the Massachusetts Association of Insurance Agents shows that 83% of Bay State drivers don’t think so. The MAIA poll also confirmed that 63.5% of voters would “definitely” or “probably” support a law that banned insurance companies from referring to credit scores when determining car insurance rates.

The underlying issue here is socioeconomic equality. I recently spoke with the MAIA’s Vice President of Government Affairs & General Counsel, Daniel J. Foley, Jr. (Esq., CAE), who told me that it is unfair for insurance companies to use factors like occupation, education and credit scores when setting car insurance rates because such factors “have nothing to do with a person’s driving ability… auto insurance premiums should be based as much as possible on experience.”

And while the state’s current insurance commissioner is upholding regulations that ban insurance companies from considering socioeconomic factors — such as occupation, education and credit scores — when setting premiums, Foley contends that the state needs a law to that effect on the books. As he pointed out, a change in administration could result in a change in regulations. By codifying these regulations in law, “consumers would be better protected.”

So how much of an impact can a credit rating have on a driver’s auto insurance premium? Let’s take a look at some findings from the Nevada 2010 Consumer’s Guide to Auto Insurance Rates (.pdf). The guide, which was created by the State of Nevada Department of Business & Industry, Division of Insurance, shows that premiums can fluctuate considerably based solely on credit rating.

Consider three hypothetical drivers from the guide, all of whom had identical driver profiles with the exception of credit rating. The driver with the best credit rating possible had an average six-month insurance premium of $839 and a potential maximum six-month premium of $1,518. In comparison, the driver with an average credit rating had an average premium of $1,049 and a potential maximum premium of $2,080. Finally, the driver with the worst credit rating possible had an average premium of $1,465 and a potential maximum premium of $3,116.

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Posted by erik devaney on Aug 30 2011. Filed under Business, Top Stories. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry