Michigan Insurers Can’t Use Credit Scores To Determine Rates
September 8, 2008 · Print This Article
The Michigan Court of Appeals made a decision today, prohibiting Michigan home, auto, and casualty insurance providers from using policyholders’ FICO credit scores to determine their rates. The Court of Appeals had overruled a decision made by a lower-level Michigan court in 2005.
For the past 20 years, credit reporting bureaus have made Americans’ track records at paying off loans and other forms of debts readily accessible to the public. This practice has made it easy for banks, credit card companies, insurance companies, and other organization to approach their customers in new and more profitable ways. Companies have been able to tailor their approach to their customer’s level of creditworthiness, and thus cut down on risk and increase profits.
For insurance providers, this has meant looking up policyholders’ FICO scores–the number used by credit bureaus to determine every American’s debt history–in order to determine the rates those policyholders will receive. For many years, insurance providers in Michigan have been offering customers discounts on their premiums based on the customers’ credit scores. As a rule, policyholders with high FICO scores got the discounts, while policyholders with low FICO scores have had to pay the higher rates.
This practice was questioned in Michigan’s court system during the early 2000′s. Opponents of the practice claimed that determining insurance policyholders’ rates based on their credit scores was unjust to those without the financial resources to maintain high scores. Moreover, claimed the opponents, this practice unjustly affected racial and ethnic minorities, as well as younger and poorer Michigan residents. These groups of people should not the face additional obstacle of high premiums when trying to purchase insurance, claimed those who sought to regulate the Michigan insurance providers.
In 2005, the Michigan district court ruled against those who were in favor of regulation. The district court’s decision was appealed, however. Today, the Michigan Court of Appeals reversed the decision of the lower-level court.
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[...] Michigan Insurers Can’t Use Credit Scores To Determine Rates [...]
My insurance company whom i’ved paid on time for years has determind to rise my premium because i had to recently file bk.
i’am tried of being miss used by my goverment and by business that i have supported for years, i work everyday 6 days per/week. when will this country give it’s tax payers real JUSTICE.