Smart Auto Insurance Blog

According to the article “Credit Scores Studied As Factor” by the Freepress Staff on Freep.com, the Michigan Supreme Court listened to arguments on October 7th about auto insurance companies using a customer’s credit score when considering their home and auto insurance rates.

Using the credit score was outlawed by the state back in 2005, but the insurance companies will be allowed to use the score as a risk factor pending the outcome of their lawsuit currently in the Supreme Court.  Most insurance companies offering Michigan auto insurance are to offer some sort of discount on premiums with use of a credit score.

Lawyers representing the insurance industry told justices that Linda Watters, the former Insurance Commissioner, overstepped her boundaries when she banned discounts based on good credit ratings.  Attorney Peter Ellsworth believes that insurance scores do not work and states that 60% of policyholders will pay higher costs if the court allows the ban of the credit score.

A report from Terrence Stutz in The Dallas Morning News states that some legislators have proposed a change to Texas auto insurance law that could result in significant savings on auto insurance rates. Two congressional Democrats, Representative Rafael Anchia and Senator Leticia van de Putte, have introduced bills that would make the following reforms:

• Auto insurance companies would no longer be able to increase rates immediately after they inform the Texas Department of Insurance. Instead, the state’s approval would be required before any rate increase.
• The state Insurance Commissioner would be elected to the public, making him or her more accountable to Texas drivers
• Insurers would be banned from using drivers’ credit ratings to determine premiums
• Policy forms would be standardized across all insurers in the state, making it easier to compare them

Terrence says that the fate of these measures is unknown at the moment.