Who's your auto insurance company?

[K Frame]

I'm thinking seriously about dropping Erie for my car, and possibly home.

I'm not happy with some of the policies that they've adopted, one of which, after 20 years of ZERO claims on my policy and paying nearly $700 a year to insure a 12 year old car, has resulted in my rates being raised because of what is essentially statistical modeling.

That pisses me off big time, that they put more weight on that than on my virtually unblemished record (one speeding ticket, one minor moving violation in those 20 years) with them.

What REALLY frosts me is that, in their letter announcing this, they say that a large component is their review of my credit report (from some credit reporting agency I've never heard of).

In the past 3 years I've increased my Experian credit score nearly 100 points to very close to 800 and I've paid off nearly 10K in debt. I can't imagine what my credit score would have to be to avoid this crap.

[Nick1911]

Personally, I use progressive for my 3 cars and home.

I've never had a problem with them, but I've never had a claim, either.

[charby]

Farm Bureau here.

Used to be with Electric Insurance Company, got married wife liked FB so we went with that.

Check out Electric Insurance Co, I used to get it cheaper there than Progressive ever could.

[K Frame]

I think Electric is regional and not in Virginia.

Nope, appears that they are in Virginia.

[41magsnub]

Personally, I use progressive for my 3 cars and home.

I've never had a problem with them, but I've never had a claim, either.

Same here for about 4 months.  My previous Insurance company of 6 years was decertified by Allied Insurance and never got around to my accounts to let me know or arrange for different coverage.  When I got the letter of termination from Allied and had not heard anything from my company over a week later I figured I needed to make a change.

[Balog]

USAA and couldn't be happier. Don't know if you qualify though.

[mtnbkr]

I'm with Erie as well.  Haven't received that letter yet.

Other than one semi-serious accident nearly 5 years ago (brake failure led to rear ending a guy on I66 during rush hour with enough speed to make it a chain reaction involving 4 drivers besides myself), I've only had two speeding tickets since getting my license.  My credit rating is pretty damn good as well (over 800 last time it was pulled).  My only other claim with them was a windshield replacement when it was cracked by a rock.

I have two drivers with full coverage and a house policy with them.  If they jack with my rates, I'll go elsewhere.  I've been with them for over 10 years.

Chris

[K Frame]

Unfortunately no, I don't qualify for USAA.


Chris, the notification came in my annual policy renewal, which was late April.

I'm going to call my agent later today and get his take on it, but if they don't back down on this, I'm going elsewhere. I've already gotten a couple of quotes that make it pretty clear that I can save money by going elsewhere, but I do like the 20 year association with a company. I have first accident and first ticket forgiveness, but I'll be damned if they're going to raise my rates like this when I've had 0 claims with them in 20 years and have paid my policies on time like a good little droog.

[AZRedhawk44]

I'm with State Farm.  They have 2 companies, a "front" and a "back" company.  If you're with them long enough and have a clean record, your policy gets shuttled to the back company and your rates go down quite a bit. 

[Marnoot]

Personally, I use progressive for my 3 cars and home.

I've never had a problem with them, but I've never had a claim, either.

Same here, 3 vehicles and a house. Only "claim" I've had is to get windshield rock chips repaired for "free." Those have gone through without a hitch.

[MillCreek]

I started out with Safeco thirty years ago until they sold their Pacific NW personal auto book to North Pacific.  North Pacific was acquired by Liberty Mutual about five years ago.  So I now have my auto, home and umbrella coverage with Liberty Mutual.  When I bought the motorcycles last year, I discovered that Liberty does not write for motorcycles and also excluded them from my umbrella coverage.  I placed the motorcycle coverage with Progressive, the largest motorcycle underwriter in the country.  

To the extent feasible, I like to have the auto, property and liability coverage with the same carrier because it minimizes any potential coverage disputes.  I have never had an auto claim in my life, so I can't really comment on their claim service.  Liberty's rates seem competitive enough.

[never_retreat]

Geico for the truck and jeep. I think I pay 1200 ish a year for a 2002 f250 w/ full coverage and state minimum on 92 wrangler.
Ditched liberty mutual for the same reason, raising my rates for no reason. Bearing I mind I live in PRNJ an we have the highest rates next to NYC.
I do use progressive for the snowmobile because they are the cheapest, and geico doesn't do them. I have tempted to check there aut rates though.

[dogmush]

I have Progressive, and have for about 10 years now.  I've had one claim, and it was pretty painless.  My rates are lower then USAA will offer me.  It's hard to get real excited about a car insurance company, but they've done right by me.

[K Frame]

From the letter, here's the reasons they cite as the primary factors that influenced my insurance score:

1. Number of collection agency filings.

I've had one, a decade ago, in a dispute with Mobil over a bill that was paid. I provided them proof that it was paid several times, and they still sent the record to collection.

2. Number of accounts that have been established.

This is probably going to get me, as I for awhile played the "who has the lowest credit card rate out there, let's transfer to them." I did that before I realized just how that could mess with your credit score.

3. Number of accounts currently or in the past w/30+ day late payments

One, also almost a decade ago, when I moved to a new bill payment service I simply forgot to transfer one. My bad.

4. Number of open retail accounts.

This could get me, as well.


What really frustrates the living hell out of me, though, is that there is NOTHING in there about positive payment history or debt level, and that is despite Erie's website, which gives these critera for the insurance score:

New applications for credit

Amount of outstanding debt (In the past three years I've taken my debt level from nearly $14K to under $2K)

Types of credit in use and length of credit history (Some of my credit cards, all of which have EXCELLENT payment history, go back into the mid 1980s, but that doesn't seem to have been taken into account).

Payment history (they consider the negative, but they apparently don't consider the positive).

Bankruptcies (None)

Collections (As noted, one, and a disputed one at that).



I'm sorry, but I'm just frigging incensed.

[charby]

I still don't get the correlation between credit history and how well of a driver you are. In all seriousness I think it should be a federal statue that automobile insurace companies can not use credit score to determine your premium costs.

[Tuco]

I've got my 6 tonnes of scrap iron insured through Progressive.  No claims, (I have what we call here "PL/PD"  no collision or comprehensive) - no complaints. 

Three vehicles for less than 800 dollars a year including the State of Michigan's ludicrous "uninsured motorist surcharge".

[K Frame]

Overall credit score may not be the best way of saying it -- it's the number of accounts open, active, etc., but I would think that overall debt level and payment history would be a LOT more important than number of open accounts.


I just had a very good conversation with a rep. from Electric Insurance.

I have to check on some of my homeowners coverages, but I think I would end up saving quite a bit of money were I to go with Electric for both home and auto, about 300 or so a year.

[Northwoods]

All of the big insurance agencies over the last several years have gone to using credit reports to, in part, determine risk levels and hence premiums.  Part of the problem is that they make no distinction between bad credit and no credit.  In a few more years we're probably going to start getting caught up in that as our rating drops due to not having any credit records (all accounts having been paid off and closed a couple years ago now). 

[Gewehr98]

Still with AIG here, albeit the spun-off branch.

We've seen other insurance companies play the credit history thing over the last year or two, also.

It's just another way they can find to seemingly justify higher rates, IMHO.

[MillCreek]

This is from the Insurance Information Institute, so consider the source when formulating your own opinion. The link to the full article is at http://www.iii.org/media/hottopics/insurance/creditscoring/.  If you Google this topic, you will find lots of hits. The insurers have been using credit scores as part of their underwriting for several years now. If it is any comfort to you, the rating decision was probably made by an expert software system, not a person. Once certain criteria about an insured are reached, a rating decision is automatically made by the computer. You can always try to talk to a live person and have that decision reversed.


Insurance scores are confidential rankings based on credit history information. They are a measure of how a person manages his or her financial affairs. People who manage their finances well tend to also manage other important aspects of their lives responsibly, such as driving a car. Combined with factors such as geographical area, previous crashes, age and gender, insurance scores enable auto insurers to price more accurately, so that people less likely to file a claim pay less for their insurance than people who are more likely to file a claim. For homeowners insurance, insurers use other factors combined with credit such as the home’s construction, location and proximity to water supplies for fighting fires.

Insurance scores predict the average claim behavior of a group of people with essentially the same credit history. A good score is typically above 760 and a bad score is below 600. People with low insurance scores tend to file more claims. But there are exceptions. Within that group, there may be individuals who have stellar driving records and have never filed a claim just as there are teenager drivers who have never had a crash although teenagers as a group have more accidents than people in other age groups.

Credit Report Information—Who Wants It? It is becoming increasingly important to have an acceptable credit record. Whether we like it or not, society equates the ability to manage credit responsibly with responsible behavior, even if individuals have a bad credit record through no fault of their own. Landlords often look at applicants’ credit records before renting apartments to see whether they manage their finances responsibly and are therefore likely to pay their rent on time. Banks and other lenders look at the credit records of loan applicants to find out whether they are likely to have loans repaid. Some employers also look at credit records, especially where employees handle money, and view a good credit record as a measure of maturity and stability.

In some insurance companies, underwriters have long used credit records in cases where additional information was needed. Before the development of automated scoring systems, underwriters would look at the data and make decisions, often erring on the overly cautious side that disadvantaged many more people. Automated insurance scoring and underwriting systems eliminate the weaknesses inherent in someone's personal judgment and have allowed more drivers to be placed in preferred and standard rating classifications, saving them money. With the development of these scoring models, the use of credit-related information in underwriting and rating for many insurers has become routine. Insurers use insurance scores to different extents and in different ways. Most use them to screen new applicants for insurance and price new business.

Why Insurers Need It: Insurers need to be able to assess the risk of loss—the possibility that a driver or a homeowner will have an accident and file a claim—in order to decide whether to insure that individual and what rate to set for the coverage provided. The more accurate the information, the closer the insurance company can come to making appropriate decisions. Where information is insufficient, applicants for insurance may be placed in the wrong risk classification. That means that some good drivers will pay more than they should for coverage and some bad drivers will pay less than they should. The insurance company will probably collect enough premiums between the two groups to pay claims and expenses, but the good drivers will be subsidizing the bad.

By law in every state, insurers are prohibited from setting rates that unfairly discriminate against any individual. But the underwriting and rating processes are geared specifically to differentiate good risks from bad risks. Since insurance is a business, insurers favor those applicants that are least likely to suffer a loss. One of the key competitive aspects of the personal lines insurance business is the ability to segment risks and price policies accurately according to the likely cost of claims generated by those policies. Insurance scores help insurers accomplish these objectives. Actuarial studies by Tillinghast, an actuarial consultant firm, have shown a 99 percent correlation between insurance scores and loss ratio—the cost of claims filed relative to the premium dollars collected. In other words, people who have low insurance scores, as a group, account for a high proportion of the dollars paid out in claims.

Insurance scores developed by the insurance scoring company Fair Isaac involve a set of 15 to 30 credit characteristics, each with an assigned weight, that produce a score ranging from 100 to 999. The lower the score, the greater the risk. According to Fair Isaac, 76 percent of consumers exhibit good or fair credit management behavior. Only four percent of the population are so-called “no hits” with no credit history. This small group would include the very young, who have not yet established a credit history; those who might not use credit for personal or religious grounds; and retirees who have probably paid off their mortgage.

The reasons behind the predictive value of credit scores appear to be behavioral. The character trait that leads to careful money management seems to show up in other daily situations in which people have to make decisions about how to act, such as driving. People who manage money carefully may be more likely to have their car serviced at appropriate times and may also more effectively manage the most important financial asset most Americans own—their house—making routine repairs before they become major insurance losses. But of course, there are always exceptions to the rule. For example, there are people who have filed for bankruptcy that have never filed an insurance claim. Furthermore, a low insurance score doesn't predict that a person will have an accident.

The information used in insurance scoring models does not include personal data such as a person’s ethnic group, religion, gender, family or marital status, handicaps, nationality, age, address or income. The scoring process relies on information in a person's credit record. Particular emphasis is placed on those items associated with credit management patterns proven to correlate most closely with insurance risk, such as outstanding debt, length of credit history, late payments, collections and bankruptcies, and new applications for credit. Credit-related activities within the last 12 months are given most weight.

Common Misunderstandings about Credit Scoring: Many people have no idea they are beneficiaries of insurance scoring. More than 50 percent of policyholders have a lower premium because of good credit, insurers say, although consumers themselves, when asked, think most people do not benefit.

Some consumers are disturbed by the fact that, when applying for insurance, one insurer will reject their application based on their insurance score yet another company will find it acceptable. They ask how insurers' responses can be so different when they are all working from essentially the same credit report information. Many large insurance companies have now developed their own insurance scoring model, using their own proprietary information in combination with standard actuarial data. Even when insurers use the leading vendors of insurance scoring models they may have the model tailored to their own target market. Not all insurers are looking to insure the same kind of drivers or homeowners. Some may target only those with the best scores, with no recent accidents or traffic violations, while others may seek out people with a less than perfect record.

Since virtually all companies use credit information in different ways, insurance scoring fosters competition among insurance companies and more choices for the consumer.

Most people think that insurers can obtain all the information they need from state motor vehicle departments and that reportable accidents, speeding tickets, convictions for drunk driving and other traffic violations are automatically in this age of electronic communication, instantaneously recorded. But, in fact, much of that data is missing from motor vehicle records (MVRs).

A 2002 Insurance Research Council study found that MVRs are typically inaccurate. One in five convictions may be missing. An earlier study found that on average only 40 percent of reportable accidents appeared on MVRs. An analysis of current laws shows the amount of useful information is very limited. Some states don't require records of information that show how drivers perform, such as convictions for drunk driving. If a driver is found guilty of an out-of-state infraction, that information is not automatically provided to the state where the licensed driver or vehicle is registered. Other states offer drivers an opportunity to obtain a lesser sentence or to avoid having information noted in the official record. By contrast, credit records are generally complete and where they are not or are inaccurate, there is a clearly defined review process for correcting the deficiencies.

In short, credit information is generally more accurate, and that works to the advantage of the majority of insurance consumers. With this information available to insurers, a majority of policyholders will pay less for home and auto insurance.

Research: A 2004 study commissioned by the Texas Department of Insurance on the use of credit information by insurers doing business in the state found a strong relationship between credit scores and claims experience. The study also found that the use of insurance scores significantly improves pricing accuracy in predicting risk when combined with other rating variables such geographical area and age of driver. Although there was a consistent pattern of differences in credit scores among different racial/ethic groups, with blacks and Hispanics having worse scores than whites and Asians, on average the results were actuarially supported and not unfairly discriminatory. This means that all drivers with the same credit rating characteristics would be charged the same amount, regardless of race, income or ethnic background. The research, which was required by law, was conducted by the insurance department with assistance from the University of Texas and the Texas A&M University as well as the Office of Public Insurance Counsel. The findings, which were published in December 2004 and January 2005, confirm the results of other studies.

Another earlier Texas study published in March 2003 found a strong correlation between credit history and the filing of an auto insurance claim—both the size and frequency of claims. The Bureau of Business Research at the University of Texas found that when credit scores were matched up with claim data, those with the worst credit scores had claim losses that averaged $918—53 percent higher than the expected average—and those with the best credit score had losses that averaged $558—25 percent less than the average.

A June 2003 study by EPIC Actuaries conducted for the insurance industry also found that overall, insurance scores significantly increase the accuracy of the risk assessment process. Insurance scores, their study showed, are among the three most important risk characteristics for each of the six major automobile coverages. For example, for property damage liability coverage, those with the worst insurance scores had expected losses of 33 percent above average. Those with the best had losses 19 percent below average. Some 2.7 million records were studied.

Some states have examined the issue of whether credit scores have an adverse impact on low-income or minority populations. A February 2004 report issued by the Maryland Insurance Administration (MIA) found that there was insufficient data to conclusively determine whether the use of credit scoring has an adverse impact on these communities because insurers do not collect information on an applicant’s race or income. Without such data, it is not possible to match premiums paid to any socioeconomic group.

The Missouri Department of Insurance claimed in February 2004 that low-income households and minorities are adversely affected by insurance scoring. However, the department’s findings were based on flawed methodologies. For example, it aggregates ZIP code credit score data for everyone in a ZIP code area, whether they own cars or homes and therefore purchase auto or homeowners insurance or not.

[charby]

Overall credit score may not be the best way of saying it -- it's the number of accounts open, active, etc., but I would think that overall debt level and payment history would be a LOT more important than number of open accounts.


I just had a very good conversation with a rep. from Electric Insurance.

I have to check on some of my homeowners coverages, but I think I would end up saving quite a bit of money were I to go with Electric for both home and auto, about 300 or so a year.

Cool, I may have to revisit Electric Ins when our current FB policy is up.

[K Frame]

OK, I was FINALLY able to get in touch with my agent. He's tough to get.

When I asked him about this, his first response was "That damned letter."

Apparently this letter goes out to ALL Erie customers, not just those who are hit with a rate increase.

In short:

1. According to him, I'm getting significant discounts on my policy rates based on my insurance scoring and driving record.

2. All of Erie's rates went up recently, not just mine.

3. He gets an average of 5 calls just like mine a week about people who think they've been hit with a rate increase because of their insurance score and based on how the letter is worded.


I'm a bit mollified, but I'm still paying more with Erie than I would be with another company.

Now I have to decide if I really want to change companies and start out new.

[charby]

Now I have to decide if I really want to change companies and start out new.

$300 is $300. Screw 'em, if they want to be competitive they should lower their rates.

[cfabe]

My family has used state farm for about 30 years, with no complaints other than a secretary at the office screwing some stuff up and having a bad attitude about it. Rates seem low, they have handled the couple claims we have had quickly and fairly, and haven't taken to raising our rates frequently. When I moved out & bought my own house, they were lowest on home & auto because I had been with them long enough to get into their "good" company.

[K Frame]

State Farm isn't even a consideration.

They attempted to screw my parents some years ago, which resulted in my parents filing a complaint with the state of Pennsylvania and then dropping them over a relatively simple and easy matter.

They gave a good friend of mine a complete and total run around regarding a hail damage claim on his house. They lowballed him three times ($1,500 to replace a roof on a 4,500 square foot house? Yeah, right) and essentially dragged the claim process out over a nearly 6 month period.