Last week’s introduction of a bill to end credit-based insurance scoring highlights a pricing tactic that many insurers use but that consumers may be totally unaware of, according to OnlineAutoInsurance.com.
Most consumers know that the amount of accidents they’ve cause in their recent driving history can affect their prices when they get quoted for car insurance. What they might not know is that being close to their debt limit, having a bankruptcy on record or seeking new credit can also affect how much they’re quoted.
That’s because insurers in 47 states and the District of Columbia are allowed to price policies in part on the financial history of prospective policyholders. The practice is called insurance scoring, and at least three Democratic House members want it outlawed nationally. Last week, they submitted a bill to do just that.
Insurers have been engaging in the practice for more than a decade, and it has always had its supporters and opponents.
Those who support it point out that multiple studies have shown drivers with worse financial histories tend to file more and larger claims than those with better financial histories. By charging those with worse financial histories more and those with better histories less, they say, coverage is more accurately priced. By having more accurately priced coverage, low-risk drivers do not have to subsidize higher-risk drivers.
Those who oppose it say that the practice hurts lower-income drivers who have trouble covering car-related expenses in the first place. By charging them more for coverage, they say, insurers are only setting them up to make their financial hole even deeper.
If state-level pushes for bans on insurance scoring are any indication, the recently submitted bill has a long, perilous road ahead of it. Numerous bills have been submitted to state legislatures across the country to get credit out of the car coverage pricing process, but only Massachusetts has seen any success in recent history, and that bill only solidified an existing regulatory ban on the practice. The bills usually never make it out of the committees in which they’re introduced.
SOURCE Online Auto, LLC
Was this article valuable?
Here are more articles you may enjoy.