Organization Pushes Auto Insurance Credit-Rating Discussion Forward

Oct 26, 2010, 08:00 ET from

HOUSTON, Oct. 26 /PRNewswire/ --Despite opposition from another national group, the National Association of Insurance Commissioners (NAIC) has continued in its cause to generate discussion about auto insurers' use of personal credit information in setting rates. recommends that consumers make a proactive effort to understand how insurers determine their prices and that they ensure their credit information does not contain errors that could adversely affect premiums.

Prospective policyholders who go to buy auto insurance online can also visit their state department of insurance's website to find out whether and how insurers in their state are permitted to factor credit information into premium calculations.

Many shoppers may be surprised. According to an NAIC poll conducted in March of this year, 44 percent of 1,000 participants admitted to feeling "not very or not at all knowledgeable" about credit scores' role in determining their prices for coverage.

But scoring practices have been shown to have significant impact on rate-setting. A 2004 study by Texas regulators showed that the use of credit scoring had resulted in "rate swings ranging from a 40-percent decrease to a 40-percent increase" in costs for about 90 percent of the policies that were analyzed.  


Since what constitutes the lawful use of credit scores varies widely from state to state, the NAIC has held multiple hearings on their use, and the organization is currently collecting data from insurers around the country in order to put together a comprehensive report for policymakers about how insurers utilize credit data. Last month, the National Conference of Insurance Legislators publicly questioned the need for such an effort.

Although the NAIC acknowledges the predictive qualities of credit history in relation to claims trends, the organization advocates for greater transparency in how such data is applied.

Consumers who would like to access information about how insurers determine rates can go to where visitors will also be able to compare rates by using the free quote-comparison generator.