A bill to ban insurance companies from using a consumer’s credit score in setting premium for home or auto coverage is backed by Minnesota Attorney General Mike Hatch and two state legislators.
The proposed bill contends that an increasing number of insurance companies utilize credit scoring to deny coverage or bump up the rates for customers who have low credit scores.
State Senator Lary Pogemiller, DFL-Minneapolis, the bill’s sponsor in the Senate said that it is not logical for people to have car accidents because of poor credit.
His co-sponsor, Rep. Joe Mullery, DFL-Minneapolis and the House sponsor said the the use of credit scoring unfairly targets lower-and middle income consumers as well as consumers who pay their bills promptly. Mullery said that a low-risk customer should not have to create credit debt to get the best insurance rate
Hatch reported that his office has received hundreds of consumer complaints on the issue. According to Hatch, who plans to run for governor next year, consumers complained that they received higher insurance rates because of a lack of credit history, a low debt level or a credit score that dropped after multiple credit report requests.
The Insurance Federation of Minnesota’s Mark Kulda countered Hatch and the sponsors’ comments by saying that credit scores actually are more accurate and better predictors than traditional criteria used for determining an insured’s risk. Kulda added that a ban would result in a more unfair system for consumers who have been able to reduce their premiums because of good credit scores.
Topics Minnesota
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