Michigan high court OKs use of credit scores for (auto) insurance

[Bozita]

Source: Detroit News

Last Updated: July 08. 2010 10:40PM
Michigan high court OKs use of credit scores for insurance
The Detroit News


Lansing --A divided Michigan Supreme Court ruled today that insurance companies can use customers' credit scores to set rates for automobile coverage. The court sided with insurers on the hot-button issue by a 4-3 vote, ruling that the state insurance commissioner exceeded his authority by banning the practice.

Insurers long have argued that credit rates, for whatever reason, are a reliable indicator of future risk and should be considered when setting rates. The industry argues the scores are used to discount rates for those with good credit and a ban increases rates for most consumers.

"We are delighted with the decision," said Peter Kuhnmuench, executive director of the Insurance Institute of Michigan and a plaintiff in the case.

Foes including Gov. Jennifer Granholm and many legislators -- particularly in Detroit -- have said the practice punishes those with money problems and there's no correlation between money management and driving.

Read more: http://detnews.com/article/20100708/METRO/7080472/1409/rss36#ixzz0tCPAswUQ

[Robb]

1. *Automobile* insurance? That almost makes sense.

I clicking thinking this was health insurance related.

I'd have to see data before I believed there was a correlation, however.

[Bozita]

2. I fixed the title line. ... Thanks for pointing it out.

[Robb]

3. No worries

...as I said, "almost." :hi:

[sandnsea]

6. It probably "correlates" to health too

The poorer you are the worse you eat, the more you drink and smoke, and the less likely you are to take get preventive care because you can't afford it.

It won't be long before they try this with health insurance.

Maybe people with lower credit scores are on the road working more, driving trucks, delivering pizza, going back and forth to work. Whatever the case, it's disgraceful they would use this as an excuse to raise rates on people who are already having a hard enough time making ends meet.

[Iowa]

36. And it isn't just the poor who are ensnared by this crap...

10 years ago I had a low credit score. The reason: I hadn't used credit for so long that I dropped off the system's radar.

I owned my house free and clear, paid cash for cars, and had no need for credit cards. Not only did I have zero debt, I had a lot of assets. Yet my credit score was low because I had abandoned the credit system a long time prior. This forced me to get a credit card I didn't want or need - just so I don't get dinged on my damned car insurance rates.

I asked my insurance agent about it. She said she was in the same boat, as were the two guys she worked with.

It should be illegal.

[ProudDad]

34. Correlation is NOT Causation (n/t)

[phantom power]

4. Are credit scores regulated in any way?

What we have here is mandated insurance, for which we have to pay private companies, and which they now get to use information compiled by other private companies (e.g. equifax)...

what a happy little family
:eyes:

[AtheistCrusader]

5. Only useful in giving the insurance company an estimate how much they might recover

from the insured, should they do something negligent.

[StopTheNeoCons]

8. Above comment not true, ...

There has been a definitive link between good credit scores and lower loss ratios and low credit scores and higher loss ratios. It turns out, the people who care for their credit score also care for their "stuff" and risky behavior. Credit score is a better predictor of risk than any other criteria, even MVR driving history for auto insurance.

[AtheistCrusader]

10. Cite double-blind link supporting study please.

I'm open to correction on this point. But I need to see some damn good evidence.

[Cal Carpenter]

16. It's all about 'caring' for your 'stuff'?

I understand that this link is there between insurance company PROFITS (let's call it what it is really about) and credit scores, but to attribute it to an issue of whether or not one 'cares for their stuff'? Most people with bad credit scores and high auto insurance are not there because of making bad choices or being irresponsible - they are there because of systemic poverty, medical bankruptcy, unemployment... The problems are systemic and it's sorta twisted, imo, to say it's because people are too casual about their 'stuff'. They're probably more concerned with keeping a roof over their head and feeding their families.

I suppose they could withhold food to their kids in order to pay some other bill on time. :shrug:

[Kweli4Real]

17. I would love for you to supply a link ...

But it must be a peer reviewed study. I will no more accept an industry produced "definitive link" than I would accept a klan's thesis on the inferiority of non-Whites.

[Lost4words]

23. are you on the correct web site?

[LostinVA]

26. No there isn't -- BS

Through no fault of my own, I had terrible credit for seven years, and my insurance rates suffered. I'm 45 and have never had any kind of traffic ticket. I also keep my car in good running condition, and even pay more to park it off road.This is especially disgusting considering how the economy is right now.

[droidamus2]

27. Thank you mister insurance agent

I call bull crap and I don't give a damn what the 'studies' say. Up until the last few months when I finally ran out of money (been looking for full time work for a couple of years) my credit rating was fine. I'm sure its in the shitter now (haven't looked). That's means all of a sudden I'm a worse drive or more of a risk? Why don't you just admit it this is another way for a corporation to charge you more money while trying to convince you it's your own damn fault. As far as I'm concerned insurance is nothing but a government mandated scam.

[PJPhreak]

31. Nope,and I will use myself as a n example...

1.35 years on the road,over 5 million miles so far (Both Personal and Professional) Never placed a Ins.Claim,damaged a car or any piece of equipment,None.Ever.Never.

2.Never had a Credit Card,Mortgage,Auto Loan. Always paid Cash.

3.Because of No 2 my Score Sux.

4.Always Pay my bills on Time.

And I am supposed to be punished because I chose to be responsible with my money and not buy shit I cannot afford,take loans with ridiculous intrest rates or go into debt for thirty years or longer just to get a Good Score?

THAT's BULLSHIT!

[county worker]

37. That is so much bull shit I have to wear boots around here!

Most of the time the low credit score is a result of something the consumer could not control like a lay off of medical expenses.

And I know for a fact that a good credit score is a result of having a higher income than most people have.

Here are the reasons credit scores are high or low. Late payments, defaults, the amount of credit available compared to credit limits, number of credit checks, the frequency of using credit.

None of that has anything to do with character!

[sandnsea]

38. OR they don't have to make as many claims

Because they have the money to pay for "lower cost" accidents themselves which makes it look like poorer people are higher risk.

[JJ]

7. Screw the poor as usual

because they have no voices in Government.
We really need to bring back guillotines.

[HCE SuiGeneris]

9. Credit scores are absolutely discriminatory in their application.

The government allowing them to be put to this use just expedites our nation's slide towards Fascism and an oligarchical state.

[Cal Carpenter]

21. The only freedom in this pseudo-democracy of ours

Is the freedom of the corporation to make a profit.

People be damned. There is no way out of this messed up economic system, no way to survive without playing the game. And the game is rigged by privilege so many people have no chance.

:(

[Lost4words]

24. We have a winner! freedom to be ripped off isnt freedom at all.

[droidamus2]

29. You are correct but..

The only correction I would make to your statement is that these days it is to make 'maximum profit'. At one point in this country (at least in my life time) it was at least given lip service that companies must make a 'fair profit' now it the rule of thumb that corporations do nothing for free and nickle and damn the consumer for everything they can get all in the name of 'maximized profits'.

[tomm2thumbs]

11. yes, because bad credit due to paying ill parent medical bills PROVES you cannot drive well

these f*ckers are what is killing this country - 100% GREED

if you can't base someone's driving record on their driving record, they shouldn't base it on anything at all

[Deep13]

12. So, being in debt makes a person a bad driver? nt

[AtheistCrusader]

13. Or living a cash-carry no-credit-history sort of lifestyle?

[Kweli4Real]

14. This is a BAD, BAD decision ...

not only because it punishes the poor; but because it has been shown time and time again, that the use of credit scores has a disparate impact on minorities, particularly African-Americans.

Having investigated housing and insurance discrimination cases where credit scores were at issue, I can tell you with no degree of uncertainty that one's race impacts one's credit credit scores. After screening and match-pairing millions of credit histories, I found thousands of cases where there was an unexplainable 50-75 point spread between the White subject and the African-American, despite having nearly identical demographic and credit histories. .

When this evidence was produced in court for the purpose of seeking to compell the insurance industry defendant to disclose its "magic formula" for computing credit-worthiness, they refused arguing that it was a trade secret, and the court went along with it. They If the court had reviewed the algorithem, I have no doubt that they would have found a line of code indicating: "AA= -50,W= +5.

Further, well preparing for the above case, I keep hearing whispers that an executive of Fair Isaac's was once overheard at a cocktail party saying that should his office be raided, he would destroy the code and go to jail; rather than let the code become public. I'll admit I don't know if this is industry folklore, or if he was saying that the "magic formula" was so much B.S. that measured nothing. But the this comment supposedly followed a discussion of credit-worthiness and race.

[d_r]

15. correlation ne causation

[Proletariatprincess]

18. This is outrageous!

credit scores are just bogus rules created by bogus preditory companies to exploit people who have been seduced to buy on credit. It is like drug dealers giving someone a "taste" to create new customers.
They really have us over a barrel now. We have to play their game. Credit scoring is just another big extortion business. It can and is unfair and often not accurate. Paid depts can be called unpaid used to change the rules in this game.
This ruling allows the two extortion businesses, insurance and credit, to merge into a nightmare.
I hate this ruling. This will further erode what rights people have and further criminalize being poor in this country.
A terrible terrible precedent.

[handmade34]

20. I could not have said it better! thanks

[Lost4words]

22. I believe your assesment is spot on, this is wrong.

I cant pay my bills because there are no jobs so I get to pay more for everything. Isnt that nice! Is this a great country or what?

[Lost4words]

25. I love your name!

:hi:

[droidamus2]

30. A possiblity

I think one thing this downturn may cause that will be a big surprise to credit companies and other lenders is a return to the idea of don't buy anything unless you have the cash. Right now due to a long period of unemployment I am in debt up to my eyebrows (actually all the way passed the top of my head) but if things turn around and I can ever figure out a way to pay these creditors off I will have only one credit card that will be for emergencies or convenience but will be paid off immediately. Of course the credit card companies are now trying to add fees that if you don't run a balance you have to pay more in monthly or yearly fees. Maybe I'll just do a prepaid debit card. I know that basically gives them your money to play with but its less hassle and goes more with the 'only buy what you can afford'. Our grandparents and parents learned from the great depression to live within their means, but unfortunately after WWII the banks started pushing the idea of 'don't wait you can have your dream now' and the babyboomers (I being one of them) bought into it hook, line and sinker. Now many people are like me we didn't use credit to buy a bunch of stuff we didn't really need and couldn't afford we just used it to survive and now we will probably spend the rest of our lives just trying to get even financially.

[handmade34]

19. Credit scores are a scam

and a further means to control the populace. At least Granholm is against it... it's a bad practice in general

[frebrd]

28. I believe Washington State requires them to ask your permission.....

to use your credit score. GEICO asked for mine a couple of years ago. I told them to go ahead and they gave me a 20% reduction in my premium.

:)

[Bozita]

32. Michigan's Supreme Court has a long history of being very friendly to the insurance industry.

GOPers on the Court have outnumbered Dems for years.

[ProudDad]

33. The insurance companies are FULL OF SHIT!!!

I DO NOT USE CREDIT but I have a perfect driving record for the last 30 years...

So I'm penalized because my credit score is very low BECAUSE I DON'T USE CREDIT!!!

Bullshit!

But what else can you expect in a corporate capitalist paradise like the USAmerikan Empire?

[Liberal_in_LA]

35. crazy!