Lousy credit score can double Fla. car insurance bill, study says

Yikes. If your credit score goes from excellent to poor, your car insurance bill could wind up doubling in Florida no matter how great a driver you are, a new study figures.

That means an average annual premium of $1,144 could rocket to $2,635, or a 130 percent jump, according to a study commissioned by insuranceQuotes.com, affiliated with bankrate.com of North Palm Beach.

The topic comes with a heaping helping of controversy. Drivers who pay their bills on time may consider it a pretty good system. Good drivers with bad credit may think it’s outrageously unfair, irrelevant to driving performance, and it should be banned, as a handful of states do, according to the report (California, Hawaii and Massachusetts).

But many drivers don’t know it’s even a possible factor.

“Over 95% of U.S. insurance companies use credit to set auto premiums,” said Laura Adams, senior insurance analyst at insuranceQuotes.

Florida seems to come down near the middle of the pack. At the extremes, Arizona has a difference of 225 percent for premiums with excellent and poor credit, while North Carolina has about a 50 percent difference, the study calculates.

Car insuranceA spokeswoman for Florida’s Office of Insurance Regulation said she was checking to see if her office would comment on the report.

An industry group said it was unable to verify if these particular calculations seemed accurate, but did say the use of a “credit-based insurance score” can be a good thing for many drivers.

“Using credit in setting auto insurance rates is actually something that benefits the majority of people by lowering what they pay for insurance coverage,” said Lynne McChristian,  Florida representative for the industry-funded Insurance Information Institute. “Most people have good credit, and it pays off for them. Not every insurer uses a credit report in the same way. Some might use it for underwriting new business or when a new vehicle is added to the policy; others may use it to establish rates or as part of a routine review. The differences in the way it is used is what makes the auto insurance market competitive, and that gives the person shopping for insurance more choices.”

If many insurers are tight-lipped about how they use this information, how did the study calculate its numbers?

Adams said, “Insurers don’t disclose how they create a credit-based insurance score (for instance how much weight is given to a late payment or having a high debt-to-credit ratio), but they must disclose rates for different variables, such as credit tiers, age, and annual mileage.”

Here’s an explanation of methodology from the website:

Quadrant Information Services and insuranceQuotes calculated the average economic impact of credit on auto insurance rates using data from the largest carriers (representing 60-70 percent of market share) in each U.S. state and the District of Columbia. The three tiers of credit analyzed were excellent, fair and poor. Average rates are based on a 45-year-old married, employed female with a clean driving record. The hypothetical driver has a bachelor’s degree, no lapses in coverage and the following limits: $100,000/$300,000 (bodily injury), $100,000 (property damage), $100,000/$300,000 (UI/UIM), $10,000 (PIP) and a $500 deductible. The hypothetical driver owns a 2012 Toyota Camry and drives 12,000 miles annually.

The morals of the story:

1. If you needed a reminder of why your credit score can matter for more than just buying a house or car, here it is. As much as you can, clean up the score by paying off debts and correcting any errors on your credit report. Insurers may create their own scores, but they use information such as what you can see for free here: https://www.annualcreditreport.com/index.action

Or get similar information about yourself at a site such as creditkarma.com.

2. If you think this practice by insurers is unfair and should be banned, tell state officials such as Florida Chief Financial Office Jeff Atwater:

Consumer Helpline Contact Information

  • Statewide Toll-Free: 1-877-MY-FL-CFO (1-877-693-5236)


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