Consumer Group Fights Use of Credit Rating For Auto Insurance Rates

A spokesman for a consumer watchdog group has spoken out against the use of credit ratings in calculating auto insurance rates. Robert Hunter, a representative for the Consumer Federation of America, said that the practice of determining auto insurance rates by evaluating a policy holder’s credit history is “not fair” and “undermines safety.” The Washington-based group is calling on the 47 states that allow the practice to prohibit insurers from using poor credit ratings against economically disadvantaged drivers.

Study Examines Credit Rating and Auto Insurance Rates

The group’s reaction comes largely from a recent study that examined the relationship between credit scores and auto insurance rates. The consumer information site Wallethub.com recent posted the results of a study examining how different carriers adjusted their auto insurance rates for an applicant’s credit rating. The study took data from both national and regional insurance providers. Among the major national carriers, Farmers Insurance used select credit information the most in their auto insurance rate quotes, while credit ratings influenced quotes from Geico the least.

States Vary Widely in Auto Insurance Rates

The study also examined how a driver’s credit rating made their auto insurance rates vary from state to state. In Connecticut, rates varied by only about 15 percent. Auto insurance rates for Maine drivers varied by nearly 70 percent. Michigan drivers saw the highest fluctuations, as quotes for drivers with poor credit were more than double those for drivers with good credit and identical driving records.

Auto Insurance Rates: Credit vs. Driving Record

Mr. Hunter and his group maintain that the use of a driver’s credit in quoting auto insurance rates is both unfair and unsafe. He said that some insurers can value good credit more than a policy holder’s driving record in their auto insurance rate quotes. He proposed that this can lead to dangerous situations and unfair price quotes. For instance, a driver with good credit and multiple accidents, moving violations or drunk driving convictions can receive better auto insurance rates than a driver with poor credit and a clean driving record.

Group Proposes State-by-State Fight Over Auto Insurance Rates

While Mr. Hunter stated that a federal ban on the use of credit reports in calculating auto insurance rates would be unwieldy, he said that his group is ready to fight the policy one state at a time. He said that he wants to start his fight in Maine, where he spends his summer vacations. He stated that the links between auto insurance rates and credit scores inform drivers that keeping a good credit score is more important than maintaining safe driving habits.

Source: Lewiston-Auburn Sun-Journal

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