Tuesday’s Post 11.6.11 –  Auto Insurance Companies must function under a new law which will no longer consider a customer’s credit history when setting car insurance rates in Massachusetts.  This is great news for insurance consumers, especially in face of the current economic times. The move is also timely since the holiday season is upon us and customers now may have some extra money for that special gift.  A spokesman for the “Massachusetts Association of Insurance Agents” (MAIA), said that it was bad policy for insurance firms to use credit history to calculate premium rates, since it doesn’t reflect on a person’s ability to do in both the present and future. The insuring scoring issue has been a subject of debate especially in Massachusetts which is one of the states that has enforced regulatory bans on this practice. Insurers are of a different opinion; their argument is that a person’s credit status is a valid predictor of the risk involved and should thus be considered when rates are being set.  The critics disagree with this notion and term it as oppressive to low-income earners. Using credit history is undermining one’s drive. The officials maintain that the auto insurance consumers should not be overcharged due to a few hiccups in their credit history.  The premiums charged should be based on factors such as driving experience and records.  The signing in of this law will be a major relief to consumers in Massachusetts, since the unfair and discriminatory way of setting premiums will now be a thing of the past. A customer’s financial woes in the past should not hinder them from getting affordable insurance.   A study conducted by the “Federal Trade Commission” concluded that there is no strong correlation between credit scores and the size of claims, however, they could not find out why. This move by the MAIA officials has come under heavy criticism from various insurance organizations such as “Property Casualty Insurers Association of America”. After a joint house hearing in November, MAIA focus was targeted towards coming up with a compromise bill.

It was 1995 when InsureDirect.com’s agents started using credit scoring in Pennsylvania.  Progressive and Infinity Insurance Company (known as Leader Insurance at the time) introduced using a customers previous credit history to set auto insurance rates.  At the time, I felt it was very unfair to incorporate this practice in establishing one Auto Insurance Payment.  As time passed and I started to understand how credit scoring worked – I became a believer.  Although the critics are correct, credit is not a predictor of the severity of a person claims – it does predict frequency.  The bottom is, those whom have better credit have fewer accidents.  Further, those whom have better credit pay less for their auto insurance.  The same is true for a credit card or bank loan.  The better your credit; the lower the rate you pay in interest.  Like it or not, those with better credit tend to pay the debts on time and have less auto accidents.  Please keep this in mind.  There are may auto insurance carriers whom don’t use credit.  When you call the offices of InsureDirect.com, let us know how you want to be rated.  It’s your choice.

-Mike

Michael E. Dortch
President &  Managing Agent
InsureDirect.com
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania  19446
(800) 807-0762  ext. 602