Should Insurance Companies Be Able to Use Credit Reports? A Customer Says "No"


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September 20, 2002

Excerpted from an e-mail message from a policyholder to the Privacy Rights Clearinghouse.

My homeowner's insurance company, Allstate, recently informed me that they need my Social Security number for my next policy renewal.

Oh? I asked why.

I was told that all insurance companies now do a credit search and that part of setting the insurance rate is based on the result of the credit search. I was not told that any returned rating would allow my insurance rates to go down (perhaps implying that the best credit rating can only minimize rate increases).

Further, I was told that the insurance companies have determined that people with low credit ratings generate more insurance claims and thus raise premium costs. They now want the Social Security number in order to do a credit search (do they need my Social Security number for this?).

Gee, I thought that my claim history was the record they needed.

Are we on the verge of being gouged by Corporate America?

I found this document on the Allstate web site:
"Why Does Allstate Use Credit Information to Evaluate Insurance Policies?"
 http://www.allstate.com/about/credit.aspx

I plan to ask Allstate if they still use claim history, which I believe should be a much better indicator than credit history. Is there a reason why they don't want to use claim history instead? By the way, you have to scrounge the Allstate web site to find this document.

A more interesting thing would be to research other insurance companies and find out what they are doing with regard to using credit reports for their rate setting. Give that some thought and the privacy impact (more widespread use of SSN creates greater potential for identity theft). In the Internet age, lots of these legacy companies don't know how to protect their customers' data.

Be sure to check out www.creditscoring.com. It is loaded.

And do a Google search on the phrase "Insurance Credit Score" with the quotes included.  Some of the web sites go into the privacy aspects, redlining, and legality (already outlawed in some states). There is even a discussion about insurance companies becoming big brokers of this information since they are not covered by laws that control other financial institutions that want to broker this data. Maybe that is why everybody is trying to sell me insurance, even Amazon.com.

 

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