The use of credit scores in insurance underwriting continues to be a hot issue nationwide. Massachusetts is now considering new insurance regulations that would ban the use of credit scores in determining insurance rates. Massachusetts State Attorney General Martha Coakley argues that the measures are necessary to protect consumers from insurer fraud and discrimination.
The new regulations are opposed by multiple insurance groups like the American Insurance Association, these insurers and some consumer groups believe credit scoring makes sense and is fair. A wealth of research has demonstrated that consumers who do not manage their credit well tend to make more-expensive insurance claims. Insurers that use credit scores say the practice allows them to provide lower rates to consumers who produce fewer claim losses.
Politicians and some other consumer groups say the use of credit scores is unfair because the scores do not directly affect risky behavior or correlate with the frequency of claims, only their cost.
Although the two sides will never agree, the research shows on balance the use of credit scores appears to produce lower, fairer rates for most consumers. States that have barred the practice have not realized lower rates for consumers, and most comprehensive studies have found nothing unfair about the practice.
