Legislation Will Ban Insurance Companies from Profiling Low Income Policyholders
Credit profiling is being used by the insurance industry to increase rates and deny policies for low-income drivers according to Mark Thomsen, President of the Wisconsin Association for Justice. Insurance companies believe that credit profiling helps establish a relationship between financial stability and risk. In other words, the lower your insurance credit score, the more likely you are to file claims, inflate claims and commit fraud. This score is based on information contained in consumer credit reports.
“Credit profiling is being used to single out low-income drivers and charge them higher insurance rates,” Thomsen said. “This policy is punishing consumers with the least ability to pay and those with little or no credit history and is especially harmful to consumers in this difficult economic time.” Thomsen added that the Wisconsin Association for Justice supports legislation being drafted by Representative Terese Berceau (D-Madison) and commends her for standing up for low-income drivers.
The insurance credit profile is used in conjunction with motor vehicle records, loss reports, and application information to determine your insurance risk. Some companies have also started using insurance credit profiles to cancel insurance policies for low income drivers, regardless of whether a claim has been filed or premiums have been paid on time.
The insurance industry has a long history of creating policies designed to deny coverage or make it unaffordable to poor and minority groups. Insurance practices known as redlining were exposed and ultimately made illegal. Thomsen added that, “Credit profiling certainly looks a lot like the redlining practices of old and on behalf of consumers we oppose the practice.”
“Until the insurance industry ends the practice of credit profiling any other arguments they make about caring for low and middle income consumers are just a sham,” said Thomsen.
Legislation by Senator John Lehman (D-Racine) to prohibit credit profiling was passed by the State Senate last year and Thomsen says that he is optimistic that the state legislature will adopt the proposal by Representative Berceau to end the practice of credit profiling.
Mark Thomsen is the President of the Wisconsin Association for Justice. The Wisconsin Association for Justice stands with consumers to promote a fair and effective justice system for every citizen, not just the privileged and wealthy.