A insurance group in Massachusetts wants to prohibit insurance companies from using a person’s credit score as a determining factor in how much the insurer will charge that person for their car insurance premiums. This goes against the viewpoint of another insurance group. Which side is right?
The Massachusetts Association of Insurance Agents (MAIA) wants to place a petition on the 2012 state ballot that would prohibit insurance companies from using certain kinds of information in their underwriting process when they are determining the price of a person’s auto insurance premium. Specifically, they want to stop insurers from using a person’s credit score, occupation, or level of education as determining factors.
Some states, (like California), have laws that make it illegal for insurers to use a person’s credit score in their underwriting process. The problem is that there aren’t any federal laws that prevent insurance companies from taking a look at a person’s credit score. This means that an underwriter could, potentially, be influenced by that information, even if it isn’t an official part of the underwriting process.
The MAIA group argues that the price of a person’s car insurance premium should be primarily based on a person’s driving record, and their years of driving experience. They do not think that socioeconomic factors should be used because they feel using that type of information is “simply unfair, discriminatory, and unreliable”.
They believe that a person should not be discriminated against simply because the loss of a job caused that person to fall behind on their medical bills, (which can lead to a poor credit score). They also feel that using socioeconomic factors in order to decide a person’s car insurance rate doesn’t actually influence anyone to avoid risky behaviors. The group notes that, according to consumer group reports, 70% of credit reports contain mistakes.
On the other hand, the Massachusetts Insurance Federation (MIF) feels that the MAIA’s action to put a referendum question on the 2012 ballot is “unnecessary, redundant, and completely without merit”. They think the MAIA is “grandstanding”.
The MIF notes that the Independent Insurance Agents of America (IIABA), which is MAIA’s parent organization, feels that using credit information and credit based insurance scores are “effective” and an “objectively verified risk management tool”. The MIF feels that the MAIA’s true interest in placing a petition on the ballot is because the MAIA is upset about the competition between auto insurance companies in the state of Massachusetts, and wants to put a stop to it.
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