Friday’s Post 12.16.11 –  The Massachusetts Division of Insurance recently announced that one of the states direct auto insurance writers and one of the nations largest companies had agreed to settle a fine of $125,000 plus other penalties, for wrongly informing some of its clients that it had used their credit information to calculate monthly premiums for car insurance. As from September 2010, the carriers domain featured a link titled “You and your Credit Information”. This link directed consumers to an inquiry page on their personal credit information. The results displayed the policyholder’s personal details, including how the company used personal credit information, to generate auto insurance premium rates. They also included the positive and negative factors that influenced the interest rates charged on the policyholder.  Massachusetts state insurance guidelines, bar auto insurance companies from using anyones personal credit information to determine their private passenger auto insurance policy rates. The company took down the link from its domain mid November at the behest of the Division of Insurance. Over three thousand auto insurance customers had already clicked on the link, and reviewed personal credit information therein. However, the carrier claims that they did not use this data in calculating premium rates for their customers.

The Massachusetts Commissioner of Insurance insisted that the state does not permit the use of credit scores to determine interest rates for automobile insurance. Such a practice not only infringes on state regulations, but also violates client’s trust on insurers.  Consequently, the auto insurance carrier was required to contact all customers who received the wrong notifications and explain their significance. Further, they have to offer these customers a free check on their credit report. Massachusetts Division of Insurance introduced radical changes to the auto insurance market in 2008. New guidelines allowed insurers to set their own interest rates in order to compete effectively for market share. This led to an overall reduction in premium rates across the board, with new carriers joining the marketplace in droves. Part of these measures included regulations to protect consumers from unfair practices by auto insurance providers. These included a curb on the use of credit scores, marital status, occupation and homeownership, to determine premium rates for private passenger vehicle insurance.

-Mike

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