Consumers Union Urges Illinois Lawmakers to Ban Insurers From Using Credit Scores to Set Auto Rates

Experts

Programs Director
Senior Attorney; Manager, Financial Services Program
Media Director

Senate Insurance Committee Holding Hearing on SB 2208 Today at 3pm

(SPRINGFIELD, IL: May 5, 2016) – Consumers Union, the policy and advocacy division of Consumer Reports, will call on Illinois lawmakers today to support legislation prohibiting insurance companies from using a driver’s credit score to determine how much to charge for auto coverage. The Senate Insurance Committee will consider the issue during a hearing today beginning at 3pm on SB 2088, legislation introduced by Senator Jacqueline Collins, which would ban the controversial practice. Live audio of the hearing can be accessed at:
http://www.ilga.gov/senate/audvid.asp

“Many Illinois drivers pay higher insurance premiums because of their credit history even though they have a spotless driving record,” said Chuck Bell, programs director for Consumers Union who will testify at the hearing. “Credit scores are given so much weight by insurers that good drivers with poor credit can end up paying substantially more than drunk drivers with excellent credit. State lawmakers should restore some fairness to the insurance market by banning this discriminatory practice.”

A 2015 Consumer Reports analysis found that credit histories may have more to do with how much consumers pay for auto insurance than any other factor, including arrests for drunken driving. The analysis was part of a review of more than 2 billion price quotes for sample drivers obtained in August and November 2014 from up to 19 companies per state across all general zip codes in the country. Consumer Reports found that single drivers paid a median of $190 more for merely having “good” credit compared to those consumers with the best credit. That difference was $1,200 for consumers with “poor” credit scores.

Consumer Reports also found that, for those states that do not prohibit the use of credit scores, more than 75 percent of the premiums were higher for good drivers with poor credit than those with a drunken driving arrest and excellent credit. The median difference was $700.

In Illinois, the top insurers report an average rate of $2,539 for auto coverage for consumers with a spotless driving record who have poor credit compared to an average rate of $1,677 for drivers with a drunken driving conviction who have excellent credit.

The insurance industry’s use of credit scores and other non-driving factors, such as occupation, and education level, for setting premiums has an especially negative impact on low income consumers, African Americans, and Latinos. Government data and other research show that these rating factors closely correlate with race and income. Insurers are prohibited from considering race and income to price insurance in all states.

Using credit histories to price insurance can also be unfair because many credit reports contain errors that can lower a consumer’s credit score. A recent Federal Trade Commission (FTC) study found that about one in five consumers — or an estimated 40 million Americans – had an error on one of their credit reports. Similarly, a Consumer Reports nationally representative survey found that 20 percent of respondents who checked their credit reports found errors that could negatively affect their credit scores.

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Contact: Michael McCauley, mmccauley@consumer.org, 415-902-9537 (cell) or 415-431-6747, ext 7606 (office)

Consumers Union is the public policy and advocacy division of Consumer Reports. Consumers Union works for health reform, food and product safety, financial reform, and other consumer issues in Washington, D.C., the states, and in the marketplace. Consumer Reports is the world’s largest independent product-testing organization. Using its more than 50 labs, auto test center, and survey research center, the nonprofit rates thousands of products and services annually. Founded in 1936, Consumer Reports has over 8 million subscribers to its magazine, website, and other publications.