[JimmyInGreatLakes]

The governor and the insurance commissioner have been trying to delete credit scores from factors used by insurance companies to set auto premium rates. A Battle Creek circuit judge has issued an injunction on their plan and she says it's a "loss" for Michigan consumers.

Frankly, I see it as a "win" for those who pay their bills on time and otherwise keep their credit scores in the acceptable range. Statisticians have determined that there is a correlation between credit scores and claims by the insured drivers. I.E. folks with bad credit also are worse drivers. There's probably a lot to debate there but, for one, I believe if their plan was to go through, 75% of us would see higher insurance premiums while only 25% would benefit. I'm not saying all people with low credit scores are irresponsible but a great many of them have made poor decisions regarding money that got them in that bind. Is it fair that they pay higher premiums to sock them even more? Again, there IS a correlation and insurance companies are all about risk. I say, any way they can determine that risk should be used.

To support some of his "reforms", the insurance commissioner came out with a study and in this study was the statement that premiums have risen 60% since 1992. What he neglected to highlight was the simple calculation that this is less than 3%/year (less than the inflation rate). Nice twist on data.

I think rates are actually pretty fair in Michigan considering for EACH car you insure, you pay a $120 fee to support the Catastrophic Claims fund...a lovely perk to our state's lawyers from our legislature.

Disclaimer: I do not work in any way, shape, or form for a Michigan insurance company. I do notice that they are one of the only businesses in Michigan that have stable or increasing employment though.

[MittenDweller82]

Originally Posted by JimmyInGreatLakes

The governor and the insurance commissioner have been trying to delete credit scores from factors used by insurance companies to set auto premium rates. A Battle Creek circuit judge has issued an injunction on their plan and she says it's a "loss" for Michigan consumers.

Frankly, I see it as a "win" for those who pay their bills on time and otherwise keep their credit scores in the acceptable range. Statisticians have determined that there is a correlation between credit scores and claims by the insured drivers. I.E. folks with bad credit also are worse drivers. There's probably a lot to debate there but, for one, I believe if their plan was to go through, 75% of us would see higher insurance premiums while only 25% would benefit. I'm not saying all people with low credit scores are irresponsible but a great many of them have made poor decisions regarding money that got them in that bind. Is it fair that they pay higher premiums to sock them even more? Again, there IS a correlation and insurance companies are all about risk. I say, any way they can determine that risk should be used.

To support some of his "reforms", the insurance commissioner came out with a study and in this study was the statement that premiums have risen 60% since 1992. What he neglected to highlight was the simple calculation that this is less than 3%/year (less than the inflation rate). Nice twist on data.

I think rates are actually pretty fair in Michigan considering for EACH car you insure, you pay a $120 fee to support the Catastrophic Claims fund...a lovely perk to our state's lawyers from our legislature.

Disclaimer: I do not work in any way, shape, or form for a Michigan insurance company. I do notice that they are one of the only businesses in Michigan that have stable or increasing employment though.

Jimmy-

This is unfortunately a very unfair verdict for our fellow Michiganders...here's why:

Researching one's ability to make timely payments on their bills is a poor indicator of "driving" performance, and as such many thousands of good people have had events beyond their circumstances affecting their credit scores, by this I mean: job lay offs, illness, etc. Does the very fact that these people feel behind on their bills conclude that they are poor drivers and must be punished as such?

Perhaps the middle aged factory worker who has a spotless driving record becomes unemployed for an extended period of time and now must face higher insurance premiums..who wins in this situation? This is an ingenious foresight by the insurance agency to collect more from American consumers, and IS completely unfair and extremely biased.

Further examples: Certain professions pay less, and with little pay, obtaining a higher credit scores (high credit limits, etc) is virtually impossible. Do these people also need to be punished for their incomes?

Another demographic that will be doubly punished is the age group of 16-25. And while studies have concluded that they are a riskier group, again good credit is something that is nearly impossible to have at age 20. These kids will in turn look to their families for financial support, only curtailing the situation, a circle of struggle. Credit is designed to measure ones ability to repay financial debt, not measure their ability to drive a vehicle safety, to say that the two are connected is ignorant.

[Peter B]

Another fact is that insurance is one of the biggest scams of all time. Insurance claims are way down as people are driving a lot less than years ago. However, to pay for those glass and marble towers, rates go up every year without fail. Insurance is great when you need it but for those like myself and my wife who have never had an accident or ticket in the last 20 years, $3500.00 per year for the house and 2 cars seems a bit steep.

[JimmyInGreatLakes]

Originally Posted by MittenDweller82

Jimmy-

This is unfortunately a very unfair verdict for our fellow Michiganders...here's why:

Researching one's ability to make timely payments on their bills is a poor indicator of "driving" performance, and as such many thousands of good people have had events beyond their circumstances affecting their credit scores, by this I mean: job lay offs, illness, etc. Does the very fact that these people feel behind on their bills conclude that they are poor drivers and must be punished as such?

Perhaps the middle aged factory worker who has a spotless driving record becomes unemployed for an extended period of time and now must face higher insurance premiums..who wins in this situation? This is an ingenious foresight by the insurance agency to collect more from American consumers, and IS completely unfair and extremely biased.

Further examples: Certain professions pay less, and with little pay, obtaining a higher credit scores (high credit limits, etc) is virtually impossible. Do these people also need to be punished for their incomes?

Another demographic that will be doubly punished is the age group of 16-25. And while studies have concluded that they are a riskier group, again good credit is something that is nearly impossible to have at age 20. These kids will in turn look to their families for financial support, only curtailing the situation, a circle of struggle. Credit is designed to measure ones ability to repay financial debt, not measure their ability to drive a vehicle safety, to say that the two are connected is ignorant.

No ignorance at all. There IS a statistical correlation between credit scores and accident claims and that is why insurance companies can use this...obviously it has been upheld in courts because of this. It's not necessarily a slam dunk since it's been struck down in other states but if "completely unfair and extremely biased" then there wouldn't be a discussion at all. The factor would be struck down always. You're absolute statement is simply an opinion.

There's no foresight or gouging here. It's practically a zero sum game since the industry is regulated in Michigan and any savings by one group will be paid for by another.

For one thing, 16-25 year olds are through their parents most of the time. Another thing is, their rates are high anyway and credit scores are probably not a big factor even if they're on their own.

[tjay]

lets see a link with the facts to these 'statistics' then.....gotta back up your claims.

i have good credit, but i think this is unfair. discrimination is what it is.

[JimmyInGreatLakes]

The Federal Trade Commission's report to Congress in 2007: http://www.ftc.gov/os/2007/07/P04480...nce_Scores.pdf

One of their conclusions reads: "Credit-based insurance scores are effective predictors of risk under automobile policies. They are 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 price of insurance better match the risk of loss posed by the consumer. Thus, on average, higher-risk consumers will pay higher premiums and lower-risk consumers will pay lower premiums."

Within that report they cite a study: http://www.casact.org/pubs/forum/00wforum/00wf079.pdf

In this study there is a lot of statistical complexities but the overall conclusion is the correlation of credit scores to insurance risk. While they won't nail down a specific causation, there are some inferences as to causation which among other things list:

Maintenance: A person who manages their financial affairs responsibly also takes care of their insured possessions more responsibly (I don't presume all people with poor credit scores are irresponsible persons, but there is a higher likelihood).

Claims Consciousness: In a claim situation, the person with a better financial situation is less likely to file a claim by looking ahead to the next premium renewal possibility (higher premiums) while the person with the poorer financial situation is likely to file the claim for the immediate gain which has a higher value for that individual.

Fraud: The person under more financial pressure is more likely to acquiesce to pressure from, say a body shop, to inflate a claim. The author does not suggest less moral integrity for that individual in this case, merely that they would be more likely to give in to this temptation.

Stress: More stress, more likelihood to be in an auto accident.

[alliteration]

I think thats a bunch of garbage. My mother has had 1 speeding ticket the whole time she's been driving, yet has horrible credit because of her marriage. And like other people above said, you lose your job, can't pay your bills on time, and all of a sudden, even if you have a perfect record, your premium goes up because of your credit? I don't care if there is any grain of correlation, just because someone can find a petty excuse to jack up the price of something doesn't mean that it should be ok and justifiable. Case in point, I'm in the 16-25 age range, and yet I have a spotless driving record, I've never even been pulled over once for anything. Just because other people my age do, does that justify me paying for others mistakes? Hardly. Insurance is a complete scam.

[JimmyInGreatLakes]

alliteration. Yeah, that stinks when you're painted with the same broad brush as everyone else in your age category. It's all about "risk" and the insurance companies have to use something to assign that risk or else charge everyone the same amount (aside from their level of coverage and the vehicle/house type being covered). Then we'd be ticked off because we're paying more as the more risky drivers pay less than their accident record indicates they should.

I don't know if it was an accidental omission but of the eight factors the Governor wants to use for her new insurance "plan", none mention driving record (tickets/DUI convictions/accidents, etc). THAT should be on the top three of factors.

I'm no expert on premium rates but I'm not sure that suddenly poor credit will increase your rates. They way I understand it is that GOOD credit score folks are put in a risk pool that receives "discounts". I can't comment on how honest that is (if related to the lack of surcharges for poor credit), however, credit scores are only ONE factor among many that are allowable for premium rates.

[tjay]

Originally Posted by JimmyInGreatLakes

The Federal Trade Commission's report to Congress in 2007: http://www.ftc.gov/os/2007/07/P04480...nce_Scores.pdf

One of their conclusions reads: "Credit-based insurance scores are effective predictors of risk under automobile policies. They are 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 price of insurance better match the risk of loss posed by the consumer. Thus, on average, higher-risk consumers will pay higher premiums and lower-risk consumers will pay lower premiums."

Within that report they cite a study: http://www.casact.org/pubs/forum/00wforum/00wf079.pdf

In this study there is a lot of statistical complexities but the overall conclusion is the correlation of credit scores to insurance risk. While they won't nail down a specific causation, there are some inferences as to causation which among other things list:

Maintenance: A person who manages their financial affairs responsibly also takes care of their insured possessions more responsibly (I don't presume all people with poor credit scores are irresponsible persons, but there is a higher likelihood).

Claims Consciousness: In a claim situation, the person with a better financial situation is less likely to file a claim by looking ahead to the next premium renewal possibility (higher premiums) while the person with the poorer financial situation is likely to file the claim for the immediate gain which has a higher value for that individual.

Fraud: The person under more financial pressure is more likely to acquiesce to pressure from, say a body shop, to inflate a claim. The author does not suggest less moral integrity for that individual in this case, merely that they would be more likely to give in to this temptation.

Stress: More stress, more likelihood to be in an auto accident.

ummmm.......one thing i never do is take any 'study' done by the government as unbiased. the government pretty much creates the outcome they want, and then pushes that on the public. and it usually involves something that generates more money for themselves through one of their special interest groups. there are very few unbiased sources these days.

i do understand those points, BUT.....insurance is mandatory. you can't be discriminative with it unless its something that's optional. stop making me have it and i don't care what you do with it. if you're going to impose expenses on people you have to make it equal for everyone.

[tryin2buy]

I just paid my insurance and noticed that I got a good discount because of my good credit. I'll take it anyway I can get it.

When it comes to qualifying for tax credits, etc. I usually get the short end of the stick whereas others receive rebates, homestead property credits, earned income credits, child care credits.....and I don't necessarily think that is always fair. Don't even get me started on the mortgage bailouts given to some who definately didn't deserve it. Heck some people get tax refunds when they didn't even have to pay taxes! How is that fair?

So the insurance companies think that I'm a better risk because I'm responsible and pay my bills and want to give me a break for doing the right thing.....I'm not statistically savvy and don't know for sure if it really correlates to the probability of me filing a claim but finally this one works for me