Check your credit: Improved score cuts insurance rates

Target 8

GRAND RAPIDS, Mich. (WOOD) — When a trucker from Kent County found out he had been overpaying for home and car insurance, he wanted to save others from making the same costly mistake.

He contacted Target 8 to get the word out.

“I’m sure this has happened to a lot of people that don’t even know about it yet,” said the man, who didn’t want to be identified, fearing insurers might try to dump him. “They’re paying a lot more than they need to.”

A previously poor credit score was costing him nearly $500 a year in insurance premiums.

“When you come down to it, 500 bucks is an awful lot on top of what else you’re paying for insurance,” he said.

In February, the trucker noticed his insurance company still listed his credit score as 679 even though it had improved years ago and currently stands at 806.

“I’ve been with this company for 15 years, and from what I see my credit score has always been the same on my policy,” he said.

When he notified his agent of his improved score, his rate was recalculated. His told Target 8 his home insurance premium dropped from $660 a year to $458 and his monthly auto insurance payment dropped from $102 to $78. The total yearly savings: $494.

“I felt like I was being taken advantage of,” the consumer said. “The (insurance company) should be the ones to have to update (credit-based insurance rates) during every renewal.”

But that’s not how it works. If your credit score has improved since your insurance company set your rates, it’s up to you to ask for a recalculation.

“Credit factors into everything we do in life nowadays, unfortunately,” said Mike Kulka, who owns an Allstate agency on the East Beltline north of 3 Mile Road in metro Grand Rapids.

His agency does not insure the man whose rates improved, but Kulka talked to Target 8 in an effort to help educate consumers.

“I want to ensure that (clients) are very knowledgeable about what they’re paying for, and what goes in to that,” Kulka said. “At renewal time, with our annual renewals, if we see somebody… can benefit by us possibly rerunning that (credit) report to lower (their insurance premium), obviously capitalizing on a better premium, then we’ll run it, with their permission.”

But Kulka is not surprised that other companies don’t routinely look for opportunities to lower premiums.

“I don’t think a lot of agencies do that. Agencies are run by people and everybody has their own processes,” he explained.

Kulka said insurers, including Allstate, have found that credit history is a good predictor of insurance risk.

“They have found the correlation between credit scores and the amount of claims or accidents that a person gets into,” he said.

Michigan’s Department of Insurance and Financial Services told Target 8 that Michigan is among 47 states that does not prohibit the use of credit-based insurance scores as a rating factor.

“However, as with all rating factors permitted under Michigan law, an insurer must be able to demonstrate that the use of that factor is reasonably justified by differences in losses, expenses, or both,” Andrea Miller, spokesperson for DIFS, wrote in an email to Target 8.

“State law permits a consumer to request a new insurance score be calculated by the insurer and for the insured individual to be re-rated by the insurer,” she continued. “This can be done at the time or renewal or during the course of the policy (but not more frequently than one time during a 12-month period.)”

The Insurance Alliance of Michigan advises consumers to reach out their insurance companies if they have questions.

“Rating factors — including credit scores — are used by auto insurances companies across the country. The weight, and even the use of a driver’s credit score, varies from company to company,” Tricia Kinley, executive director of the alliance, wrote in an email to Target 8.

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