Many fixed income seniors have spent their lives paying for goods in advance. They have paid off their debts and are less dependent on credit. Some may now have lower credit scores because credit bureaus consider people who routinely rely on credit and credit to be unscrupulous compared to those who have paid off their debts. Is it fair for them to pay more for auto or home insurance?
In the recent discussion of an emergency rule banning insurance companies from using your creditworthiness, a simple truth has been lost: the industry is already poised to abandon this outdated and unfair method of determining what you can do to protect your car and yours House pay. In fact, they could do it today.
The insurance industry wants you to believe that their companies are hands tied by an emergency rule established by the insurance commissioner’s office last March. But their lobbyists, the American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies, never mention that insurers could use dozens of other more reliable risk factors to determine your premiums.
Instead, they want you to believe that your creditworthiness is a reflection of your self-worth. And when you have a low credit score, you have to deserve it.
They also never mention that three other states, including California, are already banning the use of credit scores, and insurers remain profitable there. You make money from other risk factors including how you drive and the number of claims you have made.
But here in Washington they want to keep a practice that they have relied on for more than 20 years and that punishes people with lower incomesincluding seniors, regardless of whether they have good driving performance and have never applied.
The tide has turned lately. Some companies go away from using credit scores and rely on something that makes sense – keeping track of your actual driving habits. This is called telematics.
There are legitimate privacy concerns with telematics, and not everyone would be comfortable with such surveillance. Corresponding guard rails are certainly required. But the efforts show that some insurers are willing to consider really reliable rating tools.
There are other innovative ideas that could benefit consumers, but provided that insurers really want to help all policyholders. This is especially true for seniors. Insurers routinely increase premiums based on age and even Make use of your long-term loyalty by never offering them better prices.
We need to get to the bottom of the causes of insurance claims. Credit scores don’t cause accidents. It’s disheartening to hear some lawmakers giving up logic and telling people to focus on their creditworthiness instead of focusing on driving behavior. Credit scores are a tool used by the financial industry – and now the insurance industry too. It uses these ratings to sell more policies to the people it really wants to insure.
But what does creditworthiness have to do with how you – whether senior or young adult – drive your car or treat your property? There are many reasons why people have low credit scores, including natural disasters, medical bankruptcies, or lack of access to credit institutions. The effects of this inequality can stretch across generations.
We welcome the opportunity to drive innovation in the insurance industry. In a time of highly polarized views fueled by deliberate misinformation, we know that long overdue reforms require collaboration with insurers. This will involve lawmakers, regulators, and wizened consumers like us to create clear and consistent rules that will create a system that is fair to everyone, regardless of your creditworthiness.
We are ready to work with insurers and lawmakers who are willing to accept fairness and give policyholders justice. Let’s begin.
Kreidler’s rule, which prohibits credit scoring, will be listened to virtually in public on Tuesday, November 23rd at 9:30 a.m. and broadcast on TVW.