Massachusetts Enacts Law on Credit Ban for Auto Insurance
- Thread starter Crabcake Johnny
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That's okay, in CA they have also 'de-emphasized' where you live in the rating factors. People who live in high crime areas will pay closer to the same as those in upscale neighborhoods.
Funny thing though, I've never had a claim for gun shots from Ruby Hill (multi-million dollar homes) but have had several from Oakland areas.
Basically, it has nothing to do with whether or not it is an indicator of claim liklihood, it is whether it is 'fair' or not. Now, figure out who determines 'fair'. (Hint, they usually get elected).
Dan
Funny thing though, I've never had a claim for gun shots from Ruby Hill (multi-million dollar homes) but have had several from Oakland areas.
Basically, it has nothing to do with whether or not it is an indicator of claim liklihood, it is whether it is 'fair' or not. Now, figure out who determines 'fair'. (Hint, they usually get elected).
Dan
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This appears to be a good law in my opinion. Should be nationwide. Credit should be used for borrowing money. Social security numbers for collecting benefits.
The use of credit score to determine an auto claim is a work around for discriminatory profiling by income, demographics, etc etc
In addition the credit scoring is a scam in itself. The formula is protected from three bureaus and the formula used is protected from the insurance carrier.
You could have a 700 or 750 credit and it might not be good enough to even buy a policy. Years ago I was shopping a motorcycle policy and was told my credit was not high enough to even get the policy. My FICO was over 750!!! It was the end of the year and they raised requirements over that to run policies off. Scam...
I have not read the full text but in theory this is a great step forward.
The use of credit score to determine an auto claim is a work around for discriminatory profiling by income, demographics, etc etc
In addition the credit scoring is a scam in itself. The formula is protected from three bureaus and the formula used is protected from the insurance carrier.
You could have a 700 or 750 credit and it might not be good enough to even buy a policy. Years ago I was shopping a motorcycle policy and was told my credit was not high enough to even get the policy. My FICO was over 750!!! It was the end of the year and they raised requirements over that to run policies off. Scam...
I have not read the full text but in theory this is a great step forward.
I am in MA and involved with the motorcycle industry.
When times were good....anyone with a pulse could buy a motorcycle ( no money down, no payment for 6 months)....but they couldn't get insurance ( you have to get insurance BEFORE you can register a vehicle in MA)
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I agree with TX - credit scoring is a scam inside of itself and should be banned for employment and insurance. It absolutely targets people who earn less.
Years back when I finally paid off basically everything - all revolving lines of credit, no more car loan, etc...I figured I'd have a great score.
Dead wrong. The ultimate irony of credit scores if if you're really on top of your game and don't have revolving debt it's hard to have a "great" score.
For auto insurers, there may be some additional risk for people with poor credit but they can manage that risk by raising rates or dropping them after claims, tickets, accidents, etc... It's not like health insurance where they're stuck with that client for life.
Interesting to note that health carriers who ARE stuck with a client for life don't use credit which means, IMHO, it's a complete money grab for auto insurers.
Years back when I finally paid off basically everything - all revolving lines of credit, no more car loan, etc...I figured I'd have a great score.
Dead wrong. The ultimate irony of credit scores if if you're really on top of your game and don't have revolving debt it's hard to have a "great" score.
For auto insurers, there may be some additional risk for people with poor credit but they can manage that risk by raising rates or dropping them after claims, tickets, accidents, etc... It's not like health insurance where they're stuck with that client for life.
Interesting to note that health carriers who ARE stuck with a client for life don't use credit which means, IMHO, it's a complete money grab for auto insurers.
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Your credit score is NOT used in insurance, a credit profile is. It actually has nothing to do with your FICO score though.
Credit scores (and credit based insurance rates) have nothing to do with your income or demographics, so its not fair to say it does. Understand the usage prior to making up your mind, please.
In short, people with a lot of collection accounts will pay a higher premium than those who pay the bills. Why? Match it to claims history (on a large scale) and you'll find those with poor credit file more claims than those with decent credit. If you ever get a chance to see the coorelation charts, you would be AMAZED.
I'm not saying I agree or disagree with using credit based scoring, but I definitely understand why it is used as a predictor of claims likelihood.
Dan
Credit scores (and credit based insurance rates) have nothing to do with your income or demographics, so its not fair to say it does. Understand the usage prior to making up your mind, please.
In short, people with a lot of collection accounts will pay a higher premium than those who pay the bills. Why? Match it to claims history (on a large scale) and you'll find those with poor credit file more claims than those with decent credit. If you ever get a chance to see the coorelation charts, you would be AMAZED.
I'm not saying I agree or disagree with using credit based scoring, but I definitely understand why it is used as a predictor of claims likelihood.
Dan
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