ALBANY, N.Y. — An advocacy group and some state lawmakers want to make it illegal in New York for car insurance companies to use your credit score to figure out your car insurance rate.
They held a news conference Wednesday morning calling for change to help people get out of poverty.
"You get your insurance, and then you are forced to not be able to pay your rent, not be able to purchase food, not be able to send your kids to college. I mean, it goes on, and on, and on, so here we are in a country that's supposed to be the greatest in the world, yet we allow a business to keep poor people poor," said Assemblymember Crystal Peoples-Stokes.
Assembly Majority Leader Crystal Peoples-Stokes is sponsoring a bill that would ban insurance companies from using your credit score to determine your car insurance rate. She also says people are punished with higher rates because of where they live.
"By no stretch of the means am I poor, but I do live in 14208, and guaranteed, we pay more for insurance in that zip code than other places do across the state. My neighbors in Cheektowaga, they don't pay as much for their insurance as I pay for mine. That is inherently unfair," says Peoples-Stokes.
The coalition New Yorkers for Responsible Lending and the Consumer Federation of America just released a report showing how what you pay for car insurance is heavily impacted by your credit score.
They got quotes for every zip code in New York from ten insurance companies that represent 80% of the market. They found people with excellent credit and a DWI conviction pay hundreds of dollars less a year than someone with poor credit and a clean driving record.
State Senator Kevin Parker is also sponsoring the bill. He says they hope to pass it this year, so people don't have to pay as much.
"It is not unheard of in New York, particularly in Brooklyn, for you to buy a car and then get an insurance quote that is higher than your monthly cost for the car. So you could get a six-hundred dollar car note and have a seven-hundred dollar insurance rate, which doesn't make any sense," said State Senator Kevin Parker.
2 On Your Side reached out to the American Property Casualty Insurance Association Wednesday afternoon to get reaction to the proposal from the insurance industry.
This is the statement 2 On Your Side received from Kristina Baldwin, vice president, American Property Casualty Insurance Association:
“All the factors that insurers use to price policies are based on the likelihood of risk and cost of future claims. This risk-based approach is the fairest way to price insurance. Credit-based insurance scores (CBIS), which are distinct from credit scores used by lenders, have been used by insurers for nearly 30 years under the watchful eye of regulators.
Only four states — California, Hawaii, Massachusetts, and Michigan — do not allow auto insurers to use CBIS. In doing so, they are forcing a majority of drivers to pay more than they would if CBIS were allowed. The vast majority of states permit the use of credit-based insurance scores because there is very high correlation between insurance scores and the likelihood of filing insurance claims. When Washington moved to ban the use of CBIS there was great opposition and outcry from seniors and consumers facing immediate and triple digit increases for auto, home, boat and renters insurance. APCIA actively opposes legislation and regulations to ban the use of this accurate and objective risk assessment tool.
By having more information as a result of using CBIS, insurers are better able to assess the risk of each driver and tailor premiums to match that risk. In many cases, they are able to offer coverage to consumers that may have been otherwise rejected. CBIS also enables insurers to offer insurance for lower premiums to those that present lower risk. The benefits of CBIS for consumers has been documented by studies published by the Arkansas Insurance Department and was highlighted recently when the Washington insurance commissioner sought to prohibit the use of credit information which led to higher premiums for lower risk drivers and homeowners for over one million consumers, particularly seniors on fixed incomes.
The Consumer Federation of America (CFA) and other critics generally only look at the premiums charged, but the cost of insurance is based on the losses that must be paid. Over the years studies have demonstrated that drivers with lower credit-based insurance scores have higher losses and those with higher credit-based insurance scores have lower losses.
Insurers recognize that no one wants to pay more for insurance than they should. This is why insurers are committed to using a wide variety of objective data including credit-based insurance scores that have been proven to accurately predict an individual’s likelihood of filing a claim. This personalized approach provides a more complete picture of each consumer and is the fairest way to determine insurance premiums.
“The foundation of insurance is risk-based pricing, which means that insurers price insurance according to the expected risk of loss of the policyholder, based on past loss experience and objective data that has a statistical correlation with expected losses and expenses.
We have several serious concerns about the value of the NY study based on the description of the study. First, quotes often undergo significant changes before a final premium is charged so any study relying on them is flawed. Second, many state motor vehicle records do not pick up crashes below a threshold or that are paid without a police report. Third, CBIS adds an objective and heightened degree of risk assessment and government as well as private studies prove the value of CBIS in assessing exposure to future risk."
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