Massachusetts Finally Reconsiders Restrictive Auto Insurance Laws

August 13th, 2007 by Jeannine C

For years Massachusetts has had the most restrictive laws in the nation concerning auto insurance rates, to the point that the state actually told insurance companies what they could charge and how much of a rate increase or decrease should be allowed.  As a result, many major companies quit offering insurance to residents, and the remaining choices were quite limited.

Now Gov. Deval Patrick has developed a plan that would permit auto insurance companies to use additional factors to determine rates which better reflect the risks the they are likely to face when covering an individual, including socio-economic factors such as income and occupation.

A few State senators fear that using some of these factors will discriminate against groups of drivers.  However just last month the FTC released a report confirming that it is acceptable for credit scores to affect auto insurance rates because they are a reliable predictor of risk.

The other 49 states permit insurance companies to use factors such as income and credit scores, driving records, occupations and geographic locations to determine automobile insurance rates.  The results accurately forecast the risk faced by insurers, enabling them to thus set more competitive rates.  This means that consumers with good driving records and other factors pay less, while drivers with poor records and bad credit pay more, just as they should.

Massachusetts tried to use legislation to force insurance premiums to fit their definition of “fair”.  The problem is the legislature is not in the insurance business. Their actions actually hurt consumers, as the state legislated them right out of benefits like accident forgiveness.  Now it’s time to remove those restrictions and allow state residents to benefit from a competitive marketplace.  The results could easily be far better than anything the government could ever impose.

Listen to Massachusetts Finally Reconsiders Restrictive Auto Insurance Laws
Listen to Massachusetts Finally Reconsiders Restrictive Auto Insurance Laws

Posted in Auto Insurance, Insurance, Insurance Information by State | No Comments »

Credit Scores Directly Affect Auto Insurance Rates

July 26th, 2007 by Brad C

The Federal Trade Commission (FTC) released a report confirming a correlation between credit scores and the number and cost of claims a consumer is likely to file against their auto insurance policy.  The accuracy of credit scores means that car insurance companies can calculate rates that better predict risk, so that lower-risk consumers could pay lower premiums and higher-risk customers will appropriately pay more for their car insurance policy.

For years auto insurance companies have used credit scores to determine risk and subsequently determine auto insurance rates.  Many people protested this, believing that ethnic factors were pulled into the calculations.  Although ethnic patterns are apparent, credit scores are based strictly on an individual’s payment history.

This report could truly help high-risk customers since it will enable insurance providers to more precisely predict risk.  In the past when companies were less sure what to charge, they chose not to offer coverage to high-risk drivers.  Now it is much easier for insurance agents to calculate an appropriate rate and offer policies to individuals and families who could never buy coverage before.

Some automobile insurance companies place a higher value on credit scores than others, so it still pays to compare quotes on multiple policies.  And remember, there are many factors that determine auto insurance rates, including driving history, an insurance company’s experience in your area, the type of car you drive, etc.  We’ve put a list of ways to save on auto insurance on to show you the things you can do to affect the quotes you receive.

Listen to Credit Scores Directly Affect Auto Insurance Rates
Listen to Credit Scores Directly Affect Auto Insurance Rates

Posted in Auto Insurance, Insurance | No Comments »