economy
Insurance rates based on credit history draw scrutiny from lawmakers in some states
Several state legislatures have bills pending that would prohibit insurers from using consumers' credit history to determine how much their premiums are.
TL;DR
- Bills are pending in several state legislatures to prohibit insurers from using consumers' credit history to set homeowners or auto insurance premiums.
- Consumer advocates argue that credit-based insurance scores are unfair and lead to higher, unaffordable premiums, even for those with good driving records.
- Insurers state that credit-based insurance scores are a tool to fairly assess risk and keep premiums low, and banning them could result in less fair and accurate rates for all.
- A 2007 FTC study indicated that 59% of consumers might see premiums decrease if credit-based insurance scores were used differently.
- Research shows that homeowners with low scores pay significantly more for identical coverage, and drivers with poor credit face substantially higher rates.
- Only a few states currently ban the use of credit history in certain insurance coverage decisions.
- While insurers determine what constitutes a 'good' score, regular credit scores can often provide an indication.