Massachusetts Enacts Law on Credit Ban for Auto Insurance

[Crabcake Johnny]

Massachusetts Governor Deval Patrick signed into law that bans the use of credit in underwriting and rating private passenger motor vehicle insurance in his state.

The law, Chapter 195 of the Acts of 2011, was signed by the governor last week. The ban has already been in practice in the state but as an administrative regulation. This latest measure codifies into law the state’s current administrative ban on the use of credit scoring.

“We want to commend the legislature and the Patrick Administration for their leadership and support on this important issue,” commented Frank Mancini, President and CEO of Massachusetts Association of Insurance Agents. His group has been the driving force in the state to put into law the current ban on using credit information. (The use of other socioeconomic factors such as education and income levels will continue to be banned in the state but as administrative regulations, as they have been in the past.)...Massachusetts Enacts Law on Credit Ban for Auto Insurance

 

[djs]

Ironically, it's pretty simple to show a relationship between credit and claims. I never would have believed this till I started working the used car lots and watching my claims skyrocket after a few months.

Of course, holding people accountable isn't the American Way anymore.

Dan

 

[BlockO]

as far as determining risk of loss, studies have shown that there is a stronger correlation between claims & credit than there is with claims & driving record.

Nevertheless, I think more and more states are going to buy into this credit ban in the future, because those in favor of banning credit are using buzz words such as "discrimination" to get law makers' attention.

I was curious as to which states besides MA currently outlaw companies from running credit?

 

[jmr30183]

as far as determining risk of loss, studies have shown that there is a stronger correlation between claims & credit than there is with claims & driving record.

Nevertheless, I think more and more states are going to buy into this credit ban in the future, because those in favor of banning credit are using buzz words such as "discrimination" to get law makers' attention.

I was curious as to which states besides MA currently outlaw companies from running credit?

I think California was the only state that prohibited the use of credit info...until now....

 

[NCAgent]

I think that with some companies they don't use credit in MD, like I think Allstate was like that. Maybe it was an Allstate thing?

 

[1manshow]

I wonder if Mr Patrick's credit stinks?

What else would motivate this type of legislation?...when the proof is in the actuarial statistics.

 

[djs]

Motivation? Simple, votes. The average person will see this as a way to lower rates. Most people instinctively see no coorelation between credit and auto rates, so its simply 'sticking it to the insurance companies' in the public eye.

I would question if todays environment is as accurate as it used to be. I know a lot of people who fought hard to keep their credit stellar who have been unemployed for to long and had to make some tough choices. In most cases, these would be people that would get the better rates.

Dan

 

[bobson]

I would question if todays environment is as accurate as it used to be. I know a lot of people who fought hard to keep their credit stellar who have been unemployed for to long and had to make some tough choices. In most cases, these would be people that would get the better rates.

Dan

I would too. I know good people who are sturggling financially now because of lost jobs. I'm sure their credit has taken a hit. We are also punishing people for not using credit. If someone is free and clear of debt they get discriminated against.

I used to be in favor of credit scoring but lately I'm less a fan of it. Especially since none of the companies can agree on a standard. I can get a good score with one company and a bad one with another. We can't explain it to the insured. It is a trust us factor that I don't like.

I wouldn't vote against a ban in my state.

 

[KJ in Miami]

Interesting - not sure how I stand on this subject!! Let's see how it plays out.
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Your wrong - Hawaii

I think California was the only state that prohibited the use of credit info...until now....

 

[VolAgent]

If credit wasn't a good indicator of future claims, then why would these companies bear the expense of running all the credit scores? All this will do is shift premium from people with low scores to those with higher scores. It just a shift in cost to those with better credit scores.