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Insurance companies tout themselves as representing peace of mind, protection and security, but at what cost. Over past 10 years, I have spent roughly 20,000 dollars in car insurance, what have I claimed? Easily less than half and I totaled a car. Is insurance just a form of legalized gambling protected by government? The McCarran-Ferguson Act of 1944 exempts insurance industry from antitrust laws, so here we are again without a choice; collusion is rule not competition. Where are ethics of lawmakers? Many states are screaming about this controversial issue and some states such as California have had some success, but with protection from top government what can consumers do?
I have personally written Governor of Pennsylvania about subject, one of my main questions was;
“I am a concerned citizen. Recently I noticed my car insurance rates increasing at a substantial rate. I investigated situation only to find out that my credit rating was making difference, not my driving record.”
The response I received from Department of Insurance follows:
This letter is in reponse to your complaint filed with Pennsylvania Insurance Dpartment through Governor Edward G. Rendell's correspondence office regarding use of credit as an underwriting tool for automobile insurance in Pennsylvania.
I have read through your concerns and it appears that you are questioning underwriting of automobile insurance. Specifically, use of credit in determining eligibility. Many different factors go into underwriting of an insurance policy, such as type of vehicle, drivers, location, etc. and most recently credit history. Pennsylvania law does not prohibit an insurance company fromusing credit as an underwriting tool so long as it is done within first 60 days of writing a policy. Under law, an insurance company is granted a 60 day window from inception of a policy to determine whether or not policy fits into company's guidelines.
In your letter, you stated credit scoring in part of rating structure and presumable must be approved by Insurance Department. Actually, credit scoring is part of a company's underwriting guidelines and Dapartment only regulates underwriting guideline to extent they are not discriminatory.
Also, Federal law under Fair Credit Reporting Act allows credit information to be used for underwriting financial and insurance transactions.
Debra L. Roadcap
Consumer Service Investigator
The response I received is hardly what I would call an answer, of course Federal Law preempts state law and Fair Credit Reporting Act allows for use of such information, but real question is why? An answer to this question has still not been received. I believe this is a highly unethical practice in which insurance companies are being given free rule to take advantage of low-income families, single mothers, disabled, minorities and others. If government wants to do right thing they should judge consumers on what they have done individually, not what scientist’s hypothesis they might do based on history of others.
About The Author: My name is Richard D. Schrader, I advocate consumer education on many topics and help consult American consumers with excessive credit card debt. You can visit my website at www.debtjustice.net