Insurance brokers in the U.S. advising clients with bad credit have a difficult task – according to new research from
Consumer Reports, risky borrowers are penalized by auto insurers far more severely than drivers with a whole host of other liabilities – including a past drunken-driving conviction.
The analysts reviewed price quotes from more than 700 US firms, including large players like
Allstate,
GEICO, Progressive and
State Farm, in order to determine which non-driving factors are treated with the greatest gravity.
Consistently, people with a “good” credit scores paid $68 to $526 more than those with “excellent” scores. The gap was so substantial that drivers with poor credit in Florida paid a whopping $1,552 more than those with the best scores, and it holds true even when a consumer with poor credit has never once filed a claim.
Insurers in Canada also review applicants’ credit histories when calculating premiums in provinces where it is not prohibited by law.
“It is common practice in the Canadian insurance industry to use credit history in determining premiums for personal property insurance,” said Kelley Brinkworth, manager of media relations, SGI Canada. “A credit score is the most predictive loss variable on a homeowner's risk aside from location.”
Similar to many other insurers, SGI Canada prefers to do so this with an incentive-based structure as opposed to one that could be disadvantageous to policyholders.
“SGI Canada's approach is to use it as a discount-based program; unfavourable scores receive a 0% discount,” Brinkworth said. “In addition, providing one’s credit score is entirely optional – the customer is not required to do so.”
At least with property insurance, the other factors used are “pretty standard,” and include age, location of home, claim history and value of the residence’s contents.
