Drivers with Bad Credit May Soon Pay Higher Premiums, Predicts John Banzhaf
Summary
Press Release Pricing | News by Category | News by Country | News by US Region | Recent News | PR.com News on Your Site Press Releases Public Interest Law Professor John Banzhaf Press Release Receive press releases from Public Interest Law Professor John Banzhaf: By Email RSS Feeds: Drivers with Bad Credit May Soon Pay Higher Premiums, Predicts John Banzhaf Insurance Premiums for Drivers with Poor Credit History May Soon be Raised, Based Upon a New Study Which Shows Its Not Unfair to Blacks or Poor to Base Auto Insurance Rates on Credit History, and That Such Credit-Based Ratings are Not Just a Subterfuge (Proxy) for Discriminating on the Basis of Race and/or Poverty, says Public Interest Law Professor John Banzhaf Washington, DC, February 14, 2016 --( But this may soon change, says Bazhaf, because a major new but still unpublished study shreds the argument behind laws in most states prohibiting or limiting companies’ ability to charge bad credit risks more; i.e., that credit based insurance scores are just a subterfuge (proxy) for discriminating on the basis of race and/or poverty.The study, awaiting publication, is entitled Do Credit Based Insurance Scores Proxy for Income in Predicting Auto Claim Risk?, says Banzhaf.Its as if auto insurers could not take into account factors like age, and could not charge middle-aged drivers less than teens, even though the latter have a much higher rate of accidents, explains Banzhaf, one of the countrys best known consumer advocates.But, backed up with this new data which incorporates a much more precise measure of income than prior studies, it is likely that automobile insurers will now try to change the laws so as to permit them to make more accurate risk predictions, and seek to mobilize the majority of voters who have good credit histories (andd logically object to paying higher rates than they should), in doing so, argues Banzhaf.Insurance scores, the study proves, he notes, are not in any way proxies for race or income, and, like age and driving history, serve a valuable function in helping predict which insured are more likely to have accidents.So, in most states where companies cannot base rates on such scores, those who are responsible consumers and maintain a good credit rating are forced to pay higher rates and thereby subsidize those who, as indicated by their scores, are more likely to have - and in fact do tend to have - costly accidents, the authors claim, according to Banzhaf.Its as if auto insurers could not take into account factors like age, and could not charge middle-aged drivers less than teens, even though the latter have a much higher rate of accidents, explains Banzhaf, one of the countrys best known consumer advocates.In interfering with the free enterprise system under which companies are free to set rates based upon the actual experiences of different categories of drivers - provided they do not use prohibited factors such as race - legislators mislead by so-called consumer advocates are unfairly forcing responsible drivers to pay far more than they should, and to subsidize bad drivers who have poor credit-based scores, Banzhaf says.Based upon the argument that credit histories either do not help predict accidents or are simply a proxy for discriminating on the basis of race or income, virtually all states prohibit companies from making accurate predictions based upon credit, and thereby setting rates based upon actual risk, the study shows, according to Banzhaf..But, backed up with this new data which incorporates a much more precise measure of income than prior studies, it is likely that automobile insurers will now try to change the laws so as to permit them to make more accurate risk predictions, and seek to mobilize the majority of voters who have good credit histories (andd logically object to paying higher rates than they should), in doing so, argues Banzhaf.As the study argues, insurance scores are predictive of risk because they operate as a rough measure of policyholders’ responsibility or level of caution, says Banzhaf.Prof Banzhaf maintains that it’s high time personal responsibility came back to auto insurance.