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Credit Scores — How They Affect Premiums

Posted By Megan McGreevy, Tuesday, May 16, 2017
Updated: Thursday, May 18, 2017

Credit scoring is an important insurance topic. The PIA Western Alliance has fought several credit scoring battles in many of its nine-represented states and won. Each battle comes along with the realization that many Legislators wanting to limit credit scoring have no idea how it actually helps consumers rather than hurting them.

It keeps rates lower for those with good credit and those who work hard to maintain their credit are usually a lower insurance risk anyway.

InsuranceQuotes.com did a study and as an example found credit scoring does — as opponents point out — have a big effect on homeowners insurance premiums. Those with poor credit often see higher rates:

  Those with fair credit pay 34% more for homeowners than those with excellent credit

  That’s up from 32% in 2015 and 29% in 2014

  People with poor credit rating pay an average of 91% more and that can go as high as 114% more

As you know credit scoring and its effect varies depending on the state. The insurance quote firm said poor credit in South Dakota can having you paying 288% more while in North Carolina the 0.2% more is almost insignificant.

And then you have the PIA Western Alliance state of California where credit scoring is outlawed. Also outlawing credit scoring is Massachusetts and Maryland.

When credit drops from excellent to poor, these states — including three PIA Western Alliance states in bold — see the greatest home insurance premium increases:                   

1. South Dakota — 288.1%                      

2. Arizona — 268.6%                    

3. Oklahoma — 248.0%                

4. Nevada — 235.3%                    

5. Oregon — 234.9%


These states show the smallest increase:

1. North Carolina — 0.2%

2. Florida — 25.7%

3. New York — 29.3%

4. Wyoming — 43.9%

5. Hawaii — 53.1%

These five states — three of them PIA Western Alliance states in bold — showed the greatest average premium increase for someone with fair credit as opposed to excellent credit:

1.    Arizona — 75% increase

2.    Oregon — 67% increase

3.    Montana — 67% increase

4.    Washington, D.C. — 65% increase

5.    Oklahoma — 59% increase

Insurance Quotes senior analyst Laura Adams says it is important to also note that different insurance companies use credit scoring differently. “My advice to consumers is do everything you can to build and maintain excellent credit so you pay less for credit accounts and home and auto insurance. To maintain good credit make payments on time, keep balances low, and avoid opening many new accounts,” she said.

Source link: Insurance Journal

Tags:  Credit Scoring and Insurance  Credit Scoring Battles  Homeowners  Insurance News  PIA Weekly Industry News  PIA Western Alliance 

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