More Insurers Using Homeowners’ Credit Scores to Set Premiums

When insuring their homes, homeowners might think that their eligibility and premiums are based on the value of their homes and risks related to location, security and safety. But insurers have added a new factor for homeowners to worry about-their credit scores.

Florida homeowners with high credit scores may benefit from discounts, while those with lower scores may pay more. When homeowners also have a history of filing property insurance claims, they may find it more difficult to find insurance at all.

According to information compiled by the state of Florida, more insurance companies are now performing credit checks when setting premiums. Two large companies covering 20% of Florida homes have been using credit scores. Smaller companies began making credit scoring mandatory for new applicants in 2015 and 2016. Insurance agents reluctantly accept the procedure, which requires more explanation to clients and more difficulties when there are problems with credit scores.

In one reported instance, an insurer raised a customer’s premium by $1000. When her agent suggested she might be able to get it lowered by submitting to a credit check, the customer, who had not had difficulty making payments, refused on principle.

Using credit to determine insurance premiums is sometimes controversial, and critics suggest it is unfair to minorities, the poor and the elderly. Florida’s insurance commissioner went to Congress in 2008 to plead for a nationwide ban on the practice. Currently, checking scores is commonplace in 46 states. In Florida, Title XXXVII Chapter 626, Section 9741, covering “Use of credit reports and credit scores by insurers,” was enacted to limit and regulate the practice, though it does not ban it.

Insurance companies maintain they have to check credit scores to remain competitive. Some say there is a correlation between poor credit and higher insurance claims. Customers who have suffered bankruptcies or other financial setbacks may find themselves facing higher premiums or cut off from insurance entirely.

Homeowners experiencing problems with this new practice may need to consult with an insurance law expert with an in-depth understanding of Florida property and casualty laws and regulations. If you believe you have been denied insurance unfairly or have had your rates raised unreasonably, an experienced insurance litigator may be able to help.