Why is our car insurance rate based on our credit score?

Question

It doesn't seem fair to pay higher insurance because our credit is bad! What do you think?

Answer 1

bad credit = irresponsibility.

Answer 2

I know insurance companies do it.. but to put it mildly, thats all bs. It's like back in the mid 80's, insurance companies wouldn't write florists for disability insurance.. because THEY felt alot of florists were g*y, and all would get AIDS or HIV. Personally, I don't think your credit score is an indicator of irresponsibility at all. Wonder how the actuaries will figure in the sub-prime mess?

Answer 3

it is because they have evidence that the poorer your credit score the more likely you will get into an accident.

Answer 4

Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims. Insurance scores are used to help insurers differentiate between lower and higher insurance risks and thus charge a premium equal to the risk they are assuming. Statistically, people who have a poor insurance score are more likely to file a claim.

The goal of every insurance company is to correlate rates for insurance policies as closely as possible with the actual cost of claims.

Answer 5

If you credit is bad its a sign of irresponsibility.......a clear indicator of risk..........

Answer 6

Because the data shows that lower credit score is an accurate predictor that there will be more claims, and those claims will also be more severe.

Why do 16 year olds have more claims?  Why do people with lower credit scores have more claims?  No one has done a study, so no one knows why.  The insurance industry doesn't CARE.    The point is, the relationship exists, so it's fair.  

It's a gripe of mine, that people LIKE discrimination when it works in their favor (like, you don't have to pay the same life insurance rates as a guy who's 80, and you don't have to pay the same car insurance as a kid who's 16), and only complain about it when it works against them.  

Discrimination is FAIR, because it lumps like risks together.  Otherwise, there would only be one rate, ya know?  And I DON'T think you want to pay the same rate as that guy with five DUI's.