Insurance companies use credit reports?

Just got notice from my insurance company (auto only) that they are going to be ordering insurance loss history reports and motor vehicle reports. They will help determine our eligibility for insurance and the price we may be charged.

All well and good. But here's the kicker, the part I don't get. They also say that they may order additional consumer reports that include our credit info. They may use a credit-based insurance score based on that info. And they may use a 3rd party to develop our credit-based insurance score.

Is this normal? Do many companies do this? Is this something that anyone else is outraged about, and is anyone fighting this?

I don't have much cause for concern really, but I don't get what one thing has to do with the other. You could explain that to me too!

If it matters, this is American Family Insurance.

Does State Farm do this?

Update:

I'm in Milwaukee Wisconsin.

12 Answers

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  • 1 decade ago
    Favorite Answer

    Any respectable insurance company uses credit as a risk indicator, and with good reason.

    I saw some good points mentioned, but here's a few things that haven't been mentioned.

    1. Credit is used to decrease rates, not increase them. If your credit stinks, then you don't get the decrease. The perfect example of this is in states where credit is not allowed. Across the board all rates in the state went up, since a rating factor was removed, and the insurer assumed everyone has bad credit then.

    There is statistically a direct correllation between poor credit and poor driving history and high risk. This means that more responsible people keep their finances in order and also tend to drive safer. Some would argue that this is a poor tax, however, I have seen many low income families with high credit scores and excellent driving histories, just as I have seen many rich families with terrible credit and driving histories.

    2. Regarding the zip code thing, this is 100% based on the claims ratios in a given territory, also used to decrease the rates in low risk areas. Don't believe me, go to California where zip code is no longer a factor, and people across the state pay the same high rates as the people in LA who have percentagewise a much higher risk for claims.

    3. Credit scoring is nothing new in insurance, and is a fact of life. It is one of many factors that are used to contribue to the rate. Per insurance law, a company may not unfairly discriminate. This means that they may fairly discriminate for factors such as driving history, claims, age, gender, zip code, credit, and others. However, they may not do so based on skin color, religion, etc...

    4. State Farm does use credit, as does Farmers, Geico, Progressive, Nationwide, Allstate, and every other company worth using as your carrier.

    Source(s): Insurance Agent
  • Anonymous
    5 years ago

    Help yourself - you can check your quotes in internet for example here - CHEAPTOINSURE.INFO

    RE Insurance companies use credit reports?

    Just got notice from my insurance company (auto only) that they are going to be ordering insurance loss history reports and motor vehicle reports. They will help determine our eligibility for insurance and the price we may be charged.

    All well and good. But here's the kicker, the part I don't get. They also say that they may order additional consumer reports that include our credit info. They may use a credit-based insurance score based on that info. And they may use a 3rd party to develop our credit-based insurance score.

    Is this normal? Do many companies do this? Is this something that anyone else is outraged about, and is anyone fighting this?

    I don't have much cause for concern really, but I don't get what one thing has to do with the other. You could explain that to me too!

    If it matters, this is American Family Insurance.

    Does State Farm do this?

  • Jeremy
    Lv 6
    3 years ago

    I might suggest one to try this web page where onel can get quotes from the best companies: http://COVERAGEDEALS.NET/index.html?src=2YAfeyvqQL...

    RE :Insurance companies use credit reports?

    Just got notice from my insurance company (auto only) that they are going to be ordering insurance loss history reports and motor vehicle reports. They will help determine our eligibility for insurance and the price we may be charged.

    All well and good. But here's the kicker, the part I don't get. They also say that they may order additional consumer reports that include our credit info. They may use a credit-based insurance score based on that info. And they may use a 3rd party to develop our credit-based insurance score.

    Is this normal? Do many companies do this? Is this something that anyone else is outraged about, and is anyone fighting this?

    I don't have much cause for concern really, but I don't get what one thing has to do with the other. You could explain that to me too!

    If it matters, this is American Family Insurance.

    Does State Farm do this?

    Update: I'm in Milwaukee Wisconsin.

    Follow 11 answers

  • 1 decade ago

    Yes most insurance companies now include credit as a factor in which the premium for a policy is determined.

    It's similar to purchasing a cell phone plan... when you get a cell phone, most companies, if not all, require a credit check to be run prior to signing the contract into force.

    State Farm DOES run a consumer and loss history report each time there is new business, or an added car into the household.

    Also ALL insurance companies, if not all, run loss history reports along with consumer reports.

    This is filed under ASSEMBLY BILL 912 from 2005-2006 allows consumer reports to be legal and run.

    Specifically included on page 3 of this document states: 9) insurers authorized to do business in this state who use consumer reports for underwriting insurance

    http://www.legis.state.wi.us/2005/data/AB-912.pdf

    Source(s): Licensed Resident Producer of Property & Casualty Allied Lines
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  • 1 decade ago

    An increasing number of property and casualty insurers are using credit reports when deciding whether to grant a policy, renew an existing one or offer a preferred rate. Some insurers use credit reports as their sole deciding factor. These companies say that credit information helps them Spot insurance risks, allowing them to write more insurance than they would in the absence of credit reports. However, consumers who've never had a car accident or made a claim on their home owner's policy could have a poor--or an erroneous--credit history used against them.

  • 1 decade ago

    Unfortunately there is a correlation between low credit scores and a persons ability to pay insurance on time. Also people with low scores tend to be risky drivers. People are outraged by this but this is just a means of the insurance company trying to get more money out of the consumer. There are plans to stop this. Also, there was a case about insurance company's using zip codes to price insurance. If your zip is in the hood, then you can get higher rates and they used the excuse about the possibility of theft of the vehicle.

  • 5 years ago

    Get and compare quotes from different companies at http://COVERAGEQUOTING.NET/yaxpcCK332

    RE Insurance companies use credit reports?

    Just got notice from my insurance company (auto only) that they are going to be ordering insurance loss history reports and motor vehicle reports. They will help determine our ...show more

  • Tony
    Lv 7
    1 decade ago

    Yes, most major insurance companies do this now. Apparently they've convinced the powers that be that somehow bad credit helps contribute to more losses. Personally I think it's complete BS but it's all about the mighty dollar.

  • 1 decade ago

    Do you live in NJ? They do that here too. It's unfortuante but yes, they do use your credit report to help determine your rates. I know that NJ had to agree to allow insurance carriers to use this to lure them back into the state. Prior to that almost no one wanted to write insurance in NJ.

  • 5 years ago

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