Crazy Auto Insurance Rates: Your DUI May Matter Less Than Credit Score

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A Consumer Reports investigation offers a window into the bizarre ways that we are sized up for auto premiums. Warning: It isn't pretty!

Your car insurance premium may have surprisingly little to do with your driving habits or driving record.

A two-year, in-depth car insurance investigation by Consumer Reports revealed that the amount you pay for insurance is based largely on socioeconomic factors and confusing algorithms.

Using sample driver information, CR analyzed more than 2 billion car insurance price quotes from more than 700 insurance companies across the United States, including Amica, USAA, Allstate, Geico, Progressive and State Farm. Using eight hypothetical single drivers of varying ages, CR found that individuals with good credit scores paid from $68 to $526 more than similar drivers with the best credit scores, depending on where they lived.

In one example, Consumer Reports found that its single drivers in New York with a good credit score and clean driving record would pay an average of $255 more in annual premiums than if they had excellent credit scores. In another example, in Florida, CR’s group of adult single drivers with a clean driving record and poor credit paid $1,552 more on average than if the exact same drivers had excellent credit and a drunken driving conviction.

That’s right. In some instances, an individual with poor credit would pay a higher premium than an individual with a drunken driving conviction.

Wow.

“Consumers have a right to expect that their car insurance premiums are based on meaningful behavior such as their driving record, and not on such factors as how they shop, pay their bills or how likely they are to tolerate that their rates have been hiked up,” said Consumer Reports editor in chief Diane Salvatore. “The insurance industry spends over $6 billion on advertising that only confuses the issue and makes light of the significant expense.”

Click here for a state-by-state look at how credit scores impact insurance premiums.

CR also found:

  • Advertised discounts: If you think you’re saving a lot of money by bundling your home and car insurance or installing anti-theft equipment in your vehicle, think again. “Bundling home and car insurance would save a typical policyholder just $97 a year; adding anti-theft equipment would save just $2 annually, when looking at national averages,” CR said.
  • Student-driver training: The dramatic savings often promised by insurance companies for student-driver training don’t always add up. CR said its sample family would save just $63 annually, though the discounts were more worthwhile in states like Louisiana ($155), California ($334) and Massachusetts ($386).
  • “Secret” consumer credit scores: CR found that many insurance companies pick and choose pieces of a consumer’s credit report to “create their own score for each policyholder that’s very different than a FICO score – and secret.” Even if a consumer has a clean driving record, they could end up paying more if the insurance company decides their credit score isn’t up to their standards.

If you’re as shocked as I am by CR’s car insurance findings, you’re urged to tweet the National Association of Insurance Commissioners @NAIC_News to “Price me by how I drive, not by who you think I am! #FixCarInsurance.”

If you’re looking to save money on insurance – and really, who isn’t? – click here for some help from MTN.

What do you think about your credit score’s potential impact on your car insurance rates? Sound off below or on our Facebook page.

Stacy Johnson

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