Why good drivers may pay more for car insurance than people who have had accidents

Posted at 10:54 AM, Jan 30, 2017
and last updated 2017-01-30 19:25:07-05

Is your auto insurance going up this year?  If so, it may have nothing to do with your driving record.

Insurance companies claim that good drivers get discounts.  A new report finds that some good drivers are paying higher premiums than drivers who've had accidents.

The Consumer Federation of America says some of the largest auto insurers "frequently charger higher premiums to safe drivers, than to those responsible for accidents."

The report explains that accident history is just one factor that goes into your insurance premium and lower income drivers often pay more.  In 2015, Consumer Reports released similar findings after a two year investigation.  It found many major insurance companies base prices in part on a hidden credit score that can take into account things like what kind of credit you have, your payment history and whether you've applied for credit recently.

The 2015 research compared rates for hypothetical drivers who are single with a clean driving record.  In Michigan, the average annual premium for those with an excellent car insurance credit score was over $2,300 with a good score, it was over $2,700 and with a poor score, it was just over $5,700.  That was slightly lower than for those with an excellent score and a drunk driving conviction.

State representative Brian Banks says this is a way for companies to charge what they want with no accountability.

The Insurance Information Institution claims it's based on years of research, including government studies, which shows using credit scores are a good predictor of who is more likely to be in an accident and file claims.

Representative Banks says Michigan is one of few states that also allow one's education, occupation and zip code to be factored into rates.  He's co-sponsored a number of bills over the years to prohibit the use of those factors and credit scoring.

There are a handful of states that have banned the use of credit scoring in setting rates.

"We've got to look at ways at making insurance more fair and equitable," says Banks.  "How do we do that? Only using one's driving record and their mileage to and from work."

That may become a reality in the years to come with telematics.  This includes devices you can put on your car that shows how many miles you drive, how fast you go and how hard you brake.  To this point, insurance companies haven't been able to count on people accurately reporting how much they drive or the kind of driver they are.