With
voters now receiving ballots in the mail, Oregon State Public Interest
Research Group (OSPIRG) is urging a “yes” vote on measure 42. The
measure would prohibit insurance companies from basing insurance rates
or premiums on credit scores or credit worthiness.
“The
use of credit scores or any other form of credit history is wholly
inappropriate for insurance purposes,” said OSPIRG consumer advocate
Laura Etherton, “the insurance industry should stop using credit scores
as an excuse to charge higher prices.”
OSPIRG
advocated a ban on credit scoring in insurance in the 2003 Legislative
session, and supported, as a first step, the compromise bill that
passed which prohibited the use of credit history for insurance renewal
rate setting and cancellations. Measure 42 would expand protections to
consumers shopping for new insurance coverage.
A
consumer may find himself labeled with a lower credit score for any
number of reasons, such as filing medical bankruptcy, owing higher
balances on credit cards, having an error on his credit report, or even
becoming a victim of identity theft. Victims of identity theft often
find out a thief has taken out credit in their name only after the
damage is done to their credit report. According to a 2004 OSPIRG
study, nearly one in four credit reports contained errors serious
enough to lead to the denial of credit.
“None
of these factors make the consumer a worse driver, or more likely to
have a homeowner’s insurance claim,” said Etherton, “But the insurance
companies will use that lower credit score as the reason to charge the
consumer a higher rate.”
OSPIRG
encourages insurance companies to only use factors directly related to
the insured activity in rate setting, such as a consumer’s driving
habits – tickets, accidents and driver's education courses – in auto
insurance underwriting and rate-making decisions.
“Insurance ought to be fair and transparent for consumers,” said Etherton, “credit scoring just doesn’t belong.”
