Most States Allow Auto Insurance Scoring
Did you know that your auto insurance company can charge you higher rates if you are close to the limits on your credit cards or have filed bankruptcy in the past? In most states, they can. In 47 states and the nation’s capital, credit-based car insurance pricing is allowed and is commonly used. This so-called insurance scoring has been used for more than a decade, but will be outlawed soon if some opponents have their way. According to Insurance News Net’s “OAI: Auto Insurance Scoring Bill Highlights Controversial Practice,” three Democratic House members have a bill they hope will end the process of insurance scoring.
Currently, when you are looking to get a quote on auto insurance, in most states insurers will look into your financial history before making your quote. They can increase your premium based on your applications for new credit, how close you are to your debt limits, and other financial factors. Many different states have already tried this type of bill on the state level to no avail. If state auto insurance legislation is any indicator of how this bill will fare federally, it has quite a difficult path to follow. Massachusetts is the only state that has passed a recent ban, but it was just an update of an existing ban on this insurance practice.
There are two hotly debated sides to this issue and both have their points to be made. Supporters of insurance scoring say that studies show that people with bad finances tend to file more auto insurance claims and bigger claims than those with a sound financial history. Based on this they say that pricing is more fair and accurate when insurance scoring is used. Without it, those with strong financial backgrounds would be paying more than they should to compensate for those with poor financial histories. Opponents of the program say that lower income drivers are already struggling and this will catastrophically hurt those who are trying to do the right thing by carrying auto insurance. We’ll keep you updated with where this bill goes.