A widely-used auto insurance model that charges drivers higher premiums if they have poor credit scores would be banned in Florida under a new Democratic bill filed in advance of the 2018 legislative session.
- Measure filed by Sen. Gary Farmer
- Supporters claim practice indirectly discriminates
- Insurance industry points to low credit scores as risk indicators
The measure, SB 414 by Sen. Gary Farmer (D-Lighthouse Point), would also limit the use of credit scores in property insurers' premium calculations. Supporters contend the practice indirectly discriminates against poor Floridians and minorities.
The insurance industry, however, points to data - most notably a 2003 University of Texas study - showing that lower credit scores are reliable predictors of increased accident risk. Financial responsibility, insurers argue, is cut from the same cloth as responsible driving.
It's a point of significant contention.
"They can show a correlation, but they can't explain it," said Bob Lotane, an insurance consultant and a veteran of Florida's Office of Insurance Regulation.
"A divorce can bring people's standard of living down very quickly. Or, a lot of times, people go into bankruptcy or their credit goes down because they had medical problems that, you can't blame that on being irresponsible," Lotane said. "So, that's where the controversy comes in."
Lotane noted that poor credit scores have caused auto insurance premiums in some states to balloon by 100 to 200 percent above premiums offered to motorists with excellent credit. Because the methodology Florida insurers are allowed to use is more muted, credit-related increases are typically less.
Still, Kranthi Pakala, a Tallahassee resident who supports the new legislation, believes the only premium-setting information insurers should need are customers' driving records.
"There is a chance that, you know, personal things might impact on your driving, but I don't agree a hundred percent on that," Pakala said. "It's only like 10, 15 percent, right?"