Court Decision Highlights Auto Insurance Companies’ Use of Credit Scores

Although many states allow the practice, Michigan auto insurance regulators have been trying for more than a decade to ban the use of credit history in setting rates.

FOR IMMEDIATE RELEASE
Rancho Cucamonga, California, United States of America (Free-Press-Release.com) September 9, 2010 --A recent court decision handed down by the Michigan State Supreme Court underscores the issue of auto insurance companies’ use of consumers’ credit histories. The court’s ruling, which was made in July, holds that car insurers in the Wolverine State can continue their practice of incorporating a prospective policyholder’s credit history into the formulas through which they determine premium rates. This practice is widespread among car insurance companies in states that legally allow it, but the Mich. case represents the latest attempt by a state to completely ban the practice.

Insurers in the state began using — among many other factors — bill-payment, occupation and education records to determine Michigan auto insurance rates 14 years ago. The Office of Financial and Insurance Regulation (OFIR) has been at odds with coverage providers over the practice since at least 2004, when the state commissioner moved to make credit-history data off-limits in the setting of a consumer’s rate. The case had been winding its way through various state courts until this summer. Then, In July of this year, the State Supreme Court ruled that the use of credit information in the setting of rates does not violate the state code, according to a state press release.

In a press release from the state’s department of Energy, Labor and Economic Growth, state automobile and home insurance consumer advocate Melvin Butch Hollowell voiced his staunch opposition to the ruling, saying, “A person’s occupation, education and record of paying bills have nothing to do with how that person drives.”

Although such information may not tell how well a person drives, authors of a Federal Trade Commission report from 2007 concluded that credit-based insurance scores prove to be “predictive of the number of claims consumers file and the total cost of those claims. The use of scores is therefore likely to make the prices of insurance better match the risk of loss posed by the consumer.”

Source: http://www.ftc.gov/os/2007/07/P044804FACTA_Report_Credit-Based_Insurance_Scores.pdf

To find out more about other coverage matters and about finding affordable coverage in the Wolverine State, consumers can go to http://www.onlineautoinsurance.com/michigan/ where visitors will be able to access articles and utilize the free online quote generator.

More information can be found online at http://www.onlineautoinsurance.com/

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