I’ve recently had the pleasure of purchasing a new auto vehicle….that brief high of excitement from the new car smell was cut short by the fact that I needed to swap the old car with the new car on my insurance. Sounds simple enough right? And it was simple with the exception that my monthly rate went up considerably. Then I began to wonder what’s the point of it all? Like why drive safe if my rates steady going up? So you figure if I hate shopping for cars, I really hate shopping for auto insurance so I contacted my agent and told him to shop for me. He came back saying that my current company was the cheapest he had for me….fail.
This is the hustle of auto insurance I want to discuss…why does my credit score matter to them? I’m not going to say I have awesome credit, but it’s good enough to go buy a car if I want to…which I did, but why does my current auto insurance rate based off a few mistakes I may have made with my credit 10 or so years ago? Some insurance companies believe there is a direct statistical relationship between financial stability and losses. They believe that as a group, consumers who show more financial responsibility have fewer and less costly losses, and therefore, should pay less for their insurance. Conversely, they believe that as a group, consumers who show less financial responsibility have more and costlier losses, and therefore, should pay more for their insurance. So they say if you don’t pay your bills, you’re more likely to drive recklessly? What sense does that make? For me, I haven’t been caught speeding (not saying I don’t speed) nor have I had any wrecks in the past 10 years (knock on wood). I’m over 25 years of age so my insurance should reflect THAT and not a charged off credit card from college.
Insurers that use credit information and entities that have developed credit scoring models state that there is no difference in credit scores among different income levels because there are just as many financially responsible low-income consumers as there are financially responsible high-income consumers. Now the crazy thing in this entire equation is the fact of payment history. Don’t pay your insurance premium and you’re not covered…it’s that simple! Your credit history reflects your payment history…why would it matter if you pay people on time or how much your debt/income ratio has changed? They don’t issue anything on credit or loan. I pay them, they cover my automobile. Charging me a higher premium based on my credit history makes me think I’m the one paying to see Flo, Aaron Rodgers and the Geeko on TV constantly. My rate should only go up if I’m out there running people over and flying by cops. I’m just saying…
So I ended up finding a new insurance company, and yes they use credit information, but the difference came in their approach. They gave me a quote with minimum personal information then once I gave them my actual info my payment changed a whopping $2. And they gave me a fraternity discount…shout out to the BRUHS!
Do you feel that the use of credit history to determine auto premiums is right or another way for insurance companies to earn more profits? Would you prefer a cut-rate insurance company that doesn’t do credit checks? Is it fair to have to use a cut-rate insurance company because you have poor credit?
Thanks for tuning in….