Credit Score Trumps Driving History for Car Insurance: Consumer Reports
After a two year investigation spanning 2 billion auto insurance quotes from seven hundred companies, Consumer Reports found that people with clean driving records and bad credit paid up to $1500 more a year than those with a drunk driving conviction and good credit.
This American investigation also revealed that other factors like where people shopped and how likely they were to tolerate a rate hike were calculated into their premiums. “Many consumers don’t know that insurers are judging them less on their driving and increasingly on socioeconomic factors,” Consumer Reports stated in their report.
“Auto insurance prices should be based mainly on your driving, not your credit score or shopping habits.”
Many insurance companies defend this position, stating there is a strong correlation between poor credit scores and an increased number of claims being filed. Opponents argue that only those in the most unfortunate of circumstances will be penalized in these situations.
While the practice of credit-based insurance scoring is present in Canada, each province varies in how this is implemented. Both Ontario and Alberta have banned the use of credit-based insurance scoring for auto insurance and New Brunswick has prohibited that use for all insurance.
For people on the look out for lower auto insurance premiums, be aware that bundling your home insurance and auto insurance together allows your insurer to access your credit report for your home insurance. While factoring your credit score into auto insurance premiums is outlawed, this is still permitted in many provinces for home insurance.
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