Survey shows that credit history is playing a major role in the cost of insurance coverage
Consumer Reports has released the results of a recent survey run in the United Stated concerning auto insurance quotes. The survey shows that credit history plays a major role in how much insurance coverage will cost drivers. Credit history may, in fact, have a larger influence on premiums than a person’s driving record, according to the survey. Consumer Reports’ Margot Gilman suggests that this is the case in many states, where poor credit history will have a negative impact on drivers and their insurance coverage.
Survey draws upon a staggering amount of data
For the survey, Consumer Reports reviewed some 2 billion price quotes offered by 700 auto insurance provides in all 33,149 ZIP codes in the United States. Only three states in the entire country prohibit insurers from using a consumer’s credit history to price auto insurance coverage, which means that this metric plays a powerful role that affects most consumers.
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Insurers may be using “secret scores” to price insurance coverage provided to drivers
Gilman suggests that insurance companies may be coming up with their own “secret insurance scores” to price coverage for their customers. These insurers may be basing this metric on 30 of the 130 elements that are typically used to determine a driver’s insurance premium. This may mean that socioeconomic factors are playing a larger role than a person’s actual driving record when it comes to auto insurance coverage. For many drivers, this means that they are paying more for their insurance coverage than may be necessary.
Using credit history may be an adequate way for insurers to predict claims
While using credit history as a metric to price insurance coverage has received some criticism, it may be a valuable tool for the insurance industry. According to a position paper from the Insurance Information Institute, credit score is used to determine how well consumers manage their finances. The organization notes that actuarial studies have shown that how people manage their finances is an adequate predictor of insurance claims.