Just got notice from my insurance company (auto only) that they are going to be ordering insurance loss history reports and motor vehicle reports.They will help determine our eligibility for insurance and the price we may be charged.

All well and good.But here is the kicker, the part l do not get.They also say that they may order additional consumer reports that include our credit info.They may use a credit-based insurance score based on that info.And they may use a 3rd party to develop our credit-based insurance score.

Is this normal?Do many companies do this?Is this something that anyone else is outraged about, and is anyone fighting this?

l do not have much cause for concern really, but l do not get what one thing has to do with the other.You could explain that to me too!

If it matters, this is American Family Insurance.

Does State Farm do this?
I am in Milwaukee Wisconsin.

Yes, most major insurance companies do this now. Apparently they've convinced the powers that be that somehow bad credit helps contribute to more losses. Personally l think it is complete BS but it is all about the mighty dollar.

Do you live in NJ? They do that here too. It is unfortuante but yes, they do use your credit report to help determine your rates. l know that NJ had to agree to allow insurance carriers to use this to lure them back into the state. Prior to that almost no one wanted to write insurance in NJ.

Unfortunately there is a correlation between low credit scores & a persons ability to pay insurance on time. Also people with low scores tend to be risky drivers. People r outraged by this but this is just a means of the insurance company trying to get more money out of the consumer. There r plans to stop this. Also, there was a case about insurance company is using zip codes to price insurance. If ur zip is in the hood, then u can get higher rates & they used the excuse about the possibility of theft of the vehicle.

Any respectable insurance company uses credit as a risk indicator, & with good reason.

l saw some good points mentioned, but here is a few things that have not been mentioned.

1. Credit is used to decrease rates, not increase them. If ur credit stinks, then u do not get the decrease. The perfect example of this is in states where credit is not allowed. Across the board all rates in the state went up, since a rating factor was removed, & the insurer assumed everyone has bad credit then.

There is statistically a direct correllation between poor credit & poor driving history & high risk. This means that more responsible people keep their finances in order & also tend to drive safer. Some would argue that this is a poor tax, however, l have seen many low income families with high credit scores & excellent driving histories, just as l have seen many rich families with terrible credit & driving histories.

2. Regarding the zip code thing, this is 100% based on the claims ratios in a given territory, also used to decrease the rates in low risk areas. Do not believe me, go to California where zip code is no longer a factor, & people across the state pay the same high rates as the people in LA who have percentagewise a much higher risk for claims.

3. Credit scoring is nothing new in insurance, & is a fact of life. It is one of many factors that r used to contribue to the rate. Per insurance law, a company may not unfairly discriminate. This means that they may fairly discriminate for factors such as driving history, claims, age, gender, zip code, credit, & others. However, they may not do so based on skin color, religion, etc.

4. State Farm does use credit, as does Farmers, Geico, Progressive, Nationwide, Allstate, & every other company worth using as ur carrier.

Yes most insurance companies now include credit as a factor in which the premium for a policy is determined.

It is similar to purchasing a cell phone plan. when u get a cell phone, most companies, if not all, require a credit check to be run prior to signing the contract into force.

State Farm DOES run a consumer & loss history report each time there is new business, or an added car into the household.

Also ALL insurance companies, if not all, run loss history reports along with consumer reports.

This is filed under ASSEMBLY BILL 912 from 2005-2006 allows consumer reports to be legal & run.
Specifically included on page 3 of this document states: 9) insurers authorized to do business in this state who use consumer reports for underwriting insurance

http://legis.state.wi.us/2005/data/AB-912.pdf

An increasing number of property & casualty insurers r using credit reports when deciding whether to grant a policy, renew an existing one or offer a preferred rate. Some insurers use credit reports as their sole deciding factor. These companies say that credit information helps them Spot insurance risks, allowing them to write more insurance than they would in the absence of credit reports. However, consumers who've never had a car accident or made a claim on their home owner is policy could have a poor--or an erroneous--credit history used against them.