Many people are aware that an insurance company sets their rates based on driving records. The majority have no idea that nearly all insurance companies adjust your rates based on your credit score. By adjust, they mean raise your rates for a lower score.
The practice has been attacked by many consumer groups and seems to boil to the surface more and more frequently. A study in Texas showed that the price for the same policy could vary by as much as 80% depending on a person’s credit score. Now, Massachusetts is the latest state set for a showdown between consumers and insurance groups. The Massachusetts Association of Insurance Agents (MAIA) has launched a petition drive to prohibit carriers from setting rates based on credit scores, education or the type of work a consumer does. ”Using these factors to set auto rates is simply unfair, discriminatory and unreliable,” MAIA President Frank Mancini said in a statement.
Insurance carriers defend their actions by saying that lower credit scores show that a consumer may have a more risky lifestyle leading to more frequent claims; therefore, the insurance company needs to protect itself by charging more when they get a car insurance quote. That very defense shows that it is a usurious policy that unfairly targets the poor and credit challenged.