I’m sorry that ACIC is not in favor of the Anti-Credit Bill. Credit has too many variables to be a useful tool for underwriting of insurance.
As an example, many people suffer poor credit during times of extreme illness, divorce, personal disability and a host of life traumas one must endure.
The insurance industry who promises to be there for their clients is now saying they will only be there in fair weather. Thus the client must maintain good health, don’t become disabled or suffer any other life change to make sure they maintain a good credit standing and make insurers happy.
Unfortunately, during a lifetime countless challenges will arrive and I guess we should hope the insurance industry will come to their senses and realize they should not exclude coverage for people with challenges.
After 33 years in the insurance industry I have to say I’m embarrassed by this uncaring attitude.
It’s a good thing insurance companies have written into their rules exceptions for times of illness and other extreme cases. People who have poor credit are irresponsible, and irresponsible people have more car accidents, and are notorious for not taking care of their business. They also are more likely to be fraudulent. If people are responsible and take care of their business these “challenges” will be minimal. Lets not forget, insurance is NOT charity, it’s a FOR PROFIT business. One who does not agree with this idea can find a non-profit, solvent insurer to handle their needs. Good luck.
Credit scoring has tremendous impact upon the poor, minorities and the less educated. People in these groups tend to have poorer credit scores than whites, and/or those who are more affluent. An individual who has financial means with no tickets or accidents can obtain insurance for their new $14,000 vehicle for about $600 every six months. However, the same vehicle for a person with a poor credit score may well pay $1000 dollars or more for the same coverage. No tickets, no accidents, simply a credit score which says “guilty of making a claim in the future, so pay in advance for the claim you may never have.” For a person with money, $400 dollars has little effect but, for someone on the low end of the income scale, it can be the deciding factor between buying new or being forced to accept buying used.
A young couple earning $35,000 a year purchasing their first home with good credit, may decide on a small $60,000 dollar home. The insurance for this house will be close to $500 per year, less than $100 per month added to the note. A lower income family who qualifies for assistance and special loans can purchase the same home, but due to their credit score, the price for insuring the same home will be $1000 or more. This adds almost $200 dollars per month to the note. This family will go without a home as the price for the insurance has made the note too high.
Why do the insurers do this? Because they can. Credit scoring is a proxy. Through credit scoring, determine which people have money and which ones do not. Those who have money, good credit scores and can afford to purchase life insurance and financial products from the insurance company, get the best rates. Those who do not, must pay the higher rates and supplement the low rates reserved for the more affluent.
This practice is believed by many to be a form of “redlining” which is illegal. By charging the poor and minorities higher rates, insurance companies effectively are writing themselves out of markets they do not wish to be in. These actions leave people in minority areas no choice. They must either go without insurance and place others at risk, or be forced to pay higher rates with substandard companies. Either way, they lose.
Households with credit problems generally need to save money on auto insurance, as well as on everything else. They can drive less to save on gas (which is a windfall to insurers). But auto insurance is sold “by the car.” Good economizers know that “all the miles are free” after the premium is paid, so the way to save is to insure fewer cars and drive each more miles.
When insurers experience more claims per 100 cars as a consequence of this way of saving, they call obeying the Law of Demand (buy less to save) “irresponsible” driving.
No, the solution is not per-gasoline-gallon insurance, but cents-per-mile as an alternative exposure unit option to the car-year. Learn more at http://www.centspermilenow.org
I do not like credit scoring either. A good friend of mine likes to pay cash for his purchases. The only thing he ever had a loan on was the house he purchased. He went to buy tickets for an event he wanted to go to and the store suggested he apply for a credit card with them and then he could just charge the tickets to his account. He applied for the card and was turned down because of lack of credit. This person is quite “wealthy” and it was quite a shock when he got turned down. Needless to say, I would hope the insurance company would not turn him down for insurance for the same reason.
I’m sorry that ACIC is not in favor of the Anti-Credit Bill. Credit has too many variables to be a useful tool for underwriting of insurance.
As an example, many people suffer poor credit during times of extreme illness, divorce, personal disability and a host of life traumas one must endure.
The insurance industry who promises to be there for their clients is now saying they will only be there in fair weather. Thus the client must maintain good health, don’t become disabled or suffer any other life change to make sure they maintain a good credit standing and make insurers happy.
Unfortunately, during a lifetime countless challenges will arrive and I guess we should hope the insurance industry will come to their senses and realize they should not exclude coverage for people with challenges.
After 33 years in the insurance industry I have to say I’m embarrassed by this uncaring attitude.
Petra Nova Challus
Rohnert Park, CA
It’s a good thing insurance companies have written into their rules exceptions for times of illness and other extreme cases. People who have poor credit are irresponsible, and irresponsible people have more car accidents, and are notorious for not taking care of their business. They also are more likely to be fraudulent. If people are responsible and take care of their business these “challenges” will be minimal. Lets not forget, insurance is NOT charity, it’s a FOR PROFIT business. One who does not agree with this idea can find a non-profit, solvent insurer to handle their needs. Good luck.
Credit scoring has tremendous impact upon the poor, minorities and the less educated. People in these groups tend to have poorer credit scores than whites, and/or those who are more affluent. An individual who has financial means with no tickets or accidents can obtain insurance for their new $14,000 vehicle for about $600 every six months. However, the same vehicle for a person with a poor credit score may well pay $1000 dollars or more for the same coverage. No tickets, no accidents, simply a credit score which says “guilty of making a claim in the future, so pay in advance for the claim you may never have.” For a person with money, $400 dollars has little effect but, for someone on the low end of the income scale, it can be the deciding factor between buying new or being forced to accept buying used.
A young couple earning $35,000 a year purchasing their first home with good credit, may decide on a small $60,000 dollar home. The insurance for this house will be close to $500 per year, less than $100 per month added to the note. A lower income family who qualifies for assistance and special loans can purchase the same home, but due to their credit score, the price for insuring the same home will be $1000 or more. This adds almost $200 dollars per month to the note. This family will go without a home as the price for the insurance has made the note too high.
Why do the insurers do this? Because they can. Credit scoring is a proxy. Through credit scoring, determine which people have money and which ones do not. Those who have money, good credit scores and can afford to purchase life insurance and financial products from the insurance company, get the best rates. Those who do not, must pay the higher rates and supplement the low rates reserved for the more affluent.
This practice is believed by many to be a form of “redlining” which is illegal. By charging the poor and minorities higher rates, insurance companies effectively are writing themselves out of markets they do not wish to be in. These actions leave people in minority areas no choice. They must either go without insurance and place others at risk, or be forced to pay higher rates with substandard companies. Either way, they lose.
Households with credit problems generally need to save money on auto insurance, as well as on everything else. They can drive less to save on gas (which is a windfall to insurers). But auto insurance is sold “by the car.” Good economizers know that “all the miles are free” after the premium is paid, so the way to save is to insure fewer cars and drive each more miles.
When insurers experience more claims per 100 cars as a consequence of this way of saving, they call obeying the Law of Demand (buy less to save) “irresponsible” driving.
No, the solution is not per-gasoline-gallon insurance, but cents-per-mile as an alternative exposure unit option to the car-year. Learn more at http://www.centspermilenow.org
I do not like credit scoring either. A good friend of mine likes to pay cash for his purchases. The only thing he ever had a loan on was the house he purchased. He went to buy tickets for an event he wanted to go to and the store suggested he apply for a credit card with them and then he could just charge the tickets to his account. He applied for the card and was turned down because of lack of credit. This person is quite “wealthy” and it was quite a shock when he got turned down. Needless to say, I would hope the insurance company would not turn him down for insurance for the same reason.