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DC Commissioner Does Not Want Credit Report Information to Affect Insurance Cost

By Faye Mergel
Published: Saturday, January 23rd, 2010

The insurance commissioner for the District of Columbia is pushing to ban the insurers’ practice of charging policyholders according to information on their credit report. He points to credit-based insurance discrimination in how car and homeowners are charged for their policies.

DC Commissioner Does Not Want Credit Report Information to Affect Insurance CostNegative information on a credit report can increase insurance costs for motorists. It is an underwriting practice that has been in existence for decades, and DC commissioner, Mike Kreilder, is pushing to stop that now.

Jim Arthur had no idea about that until his insurance carrier informed him that it was raising his rates because of an item they found on his credit report. Arthur once opened a store credit account to get a 10 percent discount on his furniture purchase. However, the account ruined his credit and pushed his premium rate up by $150 each year. His driving slate is clean and has never had an accident while being with a company that insures him.

Kreidler believes credit report information has nothing to do with how policyholders drive their car or maintain their home. He says he aims to revise the existing legislation that sets guidelines for the insurance industry because it is no longer working. DC’s current industry-regulating laws were passed 8 years ago, Kreidler noted.

The Commissioner said his office has received thousands of complaints from policyholders who were given higher rates because they lowered their credit limits, consolidated or cancelled credit cards, bought big-ticket merchandise that have a 12-month deferred interest, or do not have active bank or card accounts.

People have lost their jobs because of this economic downturn, Kreidler noted. He believes carriers should be embarrassed because of their practice given the current situation of consumers. He views credit-based insurance as “blatantly unfair” and expressed his resolve to ban insurers from continuing this practice.

Kreidler is pushing for approval of House Bill 2513 which prevents insurance companies from using consumer credit history in determining premium rates or eligibility.

However, carriers insist that it is necessary to refer to credit history in determining insurance availability and premium rates. Insurance agent, Karl Newman, said credit-scoring is one of the best ways to determine a policyholder’s likelihood of filing for a claim. He added that a consumer who has a low score is more likely to file claims than those who have excellent credit.

Newman cautions that this new bill could cause the rates of some people to jump by 70%, given that Washington already has one of the most restrictive industry laws in the United States.

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