The Cons of Credit-Based Insurance Pricing

Most states require that drivers have auto insurance before they are legally allowed to operate a motor vehicle. However, drivers are not only responsible for paying for their cars but also for their monthly insurance premiums. Because insurance companies use credit-based pricing methodology, people with lower credit scores may be unable to afford to legally operate their motor vehicle because they cannot afford the high premiums. Learn more about the cons of credit-based insurance pricing below:

High Monthly Premiums

With credit-based insurance pricing, people with lower credit scores are forced to pay more for insurance monthly than people with high credit scores. However, this does not take into consideration that much of today’s society depends on people having access to reliable, consistent transportation. In areas that are less-developed, or cities where public transportation is notoriously underfunded and unreliable, people with lower credit scores are forced to choose between paying expensive monthly premiums or not being able to get to where they need to go. Adults need to drive to and from work. Additionally, families need to ensure they are able to take their kids where they need to go. With little to no alternative transportation methods, people with low credit scores need to be able to afford to drive.

No Federal Regulation

According to this NBC News article, due to the lack of federal action, a growing number of states are seeking to ban the reliance of auto insurance providers on credit-based pricing. Instead, they are looking to base insurance premiums primarily on the driver’s history on the road. While insurance companies rely on the assumption that people with good credit are good drivers, many people with low credit scores do not have any speeding tickets or crash reports. For those with bad credit but stellar driving records, a driving-history-based assessment could help them save money on auto insurance.

What Comes Next?

Some states have already banned credit-based insurance pricing. Those states include California, Hawaii, and Massachusetts. Other state lawmakers in Colorado, New Jersey, New York, and Oregon have also proposed similar legislation. Contacting your state lawmakers about prohibiting credit-based auto insurance is a good way to take action. Remember, if you live in Maryland, the minimum level of auto coverage you must obtain is

• $30,000 for bodily injury per person,
• $60,000 for bodily injury for two or more people, and
• $15,000 for property damage.

If you have been denied affordable auto insurance in Maryland, our team at Maryland Auto can work with all drivers in the state of Maryland to help them obtain the coverage they need. We offer a full range of insurance options and can work with you to find the right policy for your auto insurance needs. Get a free quote today!