Jerry Falwell Insurance Advices

New research released confirmed that black and Hispanic drivers pay more for their auto insurance because insurers use credit scores to determine insurance premiums. The use of credit scores in insurance has been a controversial practice by the discriminatory impact it has on minority families with low incomes. It’s not fair to the consumer with a perfect driving record will be penalized with a higher premium because of your credit rating. Premiums should be based on risk to accidents, not the story of how consumers pay their bills on other goods and services. The report concluded that blacks and Hispanics are represented in exaggerated form among consumers with lower credit ratings. The report also found that “more than half of blacks have credit scores in the lowest quarter of the distribution of total scores, and half of Hispanics have credit scores in the lowest third distribution of total scores. Consequently, African Americans and Hispanics pay more on average for the coverage of his insurance than whites (not Hispanic) and Asians. While it is true that insurance companies may not intend to discriminate against anyone, the result is the same. Basing insurance premiums on the credit means that low-income minority consumers are forced to pay higher rates than others with the same driving record or claims.

The insurance industry has advanced the argument that drivers who have low credit scores are more likely to be involved in accidents but there is no evidence to support this claim. The FTC did not investigate whether drivers with lower credit ratings were more likely to crash, but found that there is a correlation between low credit scores and increased the likelihood of putting a claim for compensation in the future. In other words, drivers who have low credit ratings were more likely to file suit in the case of being involved in an accident. Consumers Union believes that this does not justify the use of credit ratings for insurance purposes by the discriminatory impact that has. It’s very unfair of insurance companies charge more to consumers to start simply because there is the possibility to use their policy sometime in the future. Credit ratings should not be a factor when it comes to insurance pricing. Insurance companies have kept secret the formulas used to calculate its ratings, not allowing it to make a public study of the actuarial soundness of their qualified models. The FTC report confirmed that there is no single mathematical model to see how insurers use credit information to influence decisions about insurance or to report how they come to these grades using credit information. It is very difficult for consumers to assess what can be done differently to get your credit score, and not even know the different factors that insurers regard as most favorable. Even those consumers with good credit may be forced to pay higher premiums for the peculiar way that insurance companies have to weigh the credit data. Using credit scores to price insurance is also problematic for consumers because the rating comes from credit reports that may be inaccurate.

A 2002 study conducted by the Consumer Federation of America estimated that tens of millions of Americans have been unfairly penalized for incorrect information in your credit reports. More recently, a study in 2004 by the Research Group Public Interest (U.S. Public Interest Research Group) found that one in four credit reports contained errors serious enough that they had refused to consumer loans, mortgages and to work. “Insurance companies insist that credit scores are reliable predictors of future claims even though they have no idea whether the credit information being used is accurate. Too many credit reports contain serious errors. This can result in a lower insurance rating and a higher premium. Even those consumers who have good credit with a score may be low for the insurance by the peculiar manner in which insurance companies gauge the behavior of credit. The use of credit ratings for insurance is not necessary because insurers have a variety of remedies available to protect consumers who have too many claims. Insurance companies can raise premiums for those who put too many demands or even cancel insurance consumers more prone to complaints. These measures are not yet at the same unfair results for consumers when credit information is used to extend and endorse a policy. Unlike a credit rating, such a move may be based on a risk verifiable information and not without risk or causal relationship to specific loss

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