Monday, November 9, 2009

Use of Credit Score in Insurance

Here is a message from Dan Kelso of the Ohio Insurance Institute in Columbus:

There's no need to create a "fear factor" when it comes to the use of insurance scores. The Ohio Department of Insurance regulates it, having established a credit insurance rule in 2003. This rule provides consumer protection as it pertains to insurer use of credit and prohibits insurers from using insurance scores as the sole determinant in underwriting or rating decisions.

Before calling for an overhaul to Ohio's process of determining insurance premiums, consumers should weigh The Blade's Oct. 28 guest editorial against their pocketbooks. Ohio has some of the lowest premiums in the country. Our average homeowners insurance expenditure is tied for fifth lowest at $530. The U.S. average is $804. Ohio's $654 average auto premium is 13th lowest, well below the U.S. average.

The Dallas Morning News editorial cited California and Maryland as states to emulate. Consumers are worse off in these states. California's average auto insurance premium is $843 and Maryland's is worse: $949. California's homeowners insurance averages $937 and Maryland's is $721.

States envy Ohio's affordable and competitive market. Consumers benefit from the fact that we have more auto and homeowners insurance carriers than in all but two states.

While the use of insurance scores is greatly misunderstood, the majority of insurance consumers pay less for auto and homeowners insurance with its use.

This isn't on the minds of Ohioans. ODI complaint data shows only 47 related to homeowners insurance costs in 2008. Complaints on auto insurance rates have been declining since 2002 with only 43 last year.

Ohioans aren't penalized by the use of insurance scoring models. In fact, comparing our premiums to states highlighted in the editorial, we should leave well enough alone.