insurers to use credit files to increase premiums

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https://www.thisismoney.co.uk/money/cars/article-2222085/Why-poor-pay-rich-car-cover.html#ixzz2BqcdzLQX

Britain’s biggest insurers are conducting secret credit checks on drivers and using data to pinpoint claims hotspots in a bid to hike premiums.

These tactics supposedly give the firms more detailed information about what kind of driver you are. But increasingly they threaten to push up prices to even more eye-watering levels.

The tricks are revealed as fears grow that perfectly valid insurance claims are being kicked out simply based on a gut feeling that drivers are lying about claims.

It has prompted the independent ombudsman to issue a strong warning.

Insurers have hiked premiums massively over the past decade. Figures from the AA show the average third party insurance policy has jumped from £362.80 in 2004 to £1,161.77 today — a 220 per cent leap.

The average comprehensive policy has more than doubled from £411 in 2004 to £844 today.

But insurers are desperate to find ways to rake in more cash. They are faced with an estimated £4.7 billion gap in their profits because strict new rules will ban them from taking kick-backs of up to £800 a time by passing accident victims’ details to ambulance-chasing law firms.

On top of this, EU legislation will force them to stop charging male motorists more from December 21. To fight back, Money Mail has discovered insurers are looking in to credit records as a way of deciding how much to charge.

Your credit record contains all your personal information including your history of repaying credit cards, debts and even mobile phone bills.

The theory is that drivers with low credit scores are more likely to struggle to cover the cost of repairing a car — and so would be more likely to claim.

‘This is appalling. Insurers are saying poorer people are riskier,’ says Marc Gander, founder of campaign organisation Consumer Action Group. ‘I doubt there are any proper statistics to prove this. It is just insurers looking for another way of grabbing more of our cash.’

It is understood that trade body the British Insurance Brokers’ Association (BIBA) is so concerned about the trend it has launched an investigation into how insurers are using these personal details.

Graeme Trudgill, head of corporate affairs at BIBA, says: ‘Already if you are unemployed your insurance premiums will be higher because the insurer will believe statistically you may struggle to maintain your car. Doing a credit check would be taking it to the next level.’

Britain’s biggest insurer, Aviva, confirmed it ran credit checks on customers to help decide what kind of premium to offer them.

An Aviva spokesman said: ‘We refer to credit reference agency data, using public and personal information to verify who customers are, prevent fraud, assess insurance risk and offer credit or finance using a process agreed with the agency.’

They said the credit searches will leave a mark on your file only if it is done to decide if you can make monthly premiums. Experts say other insurers are set to follow suit.

Drivers who shop around to buy car insurance using comparison websites already unwittingly allow insurers to run a credit check in the small print.

Insurers in the US have used credit records to decide premiums since the early Nineties.

In nearly one in five cases it causes premiums for drivers to rise. According to a U.S. consumer group, a 28-year-old male motorist with a poor credit score could pay £437 a year more for insurance than a driver with a good score.

Alex Hageli, director of personal lines policy at the Property Casualty Insurers Association of America, says credit records allow insurers to figure out how risky a driver is.

‘One theory is that if you are careful with your credit you are more likely to be careful with other areas of your life, such as maintaining your vehicle,’ he says.

In another move, insurers are using ever more sophisticated software to decide the risk of someone living at a specific address.

Insurers are using your whole postcode — which covers just a few neighbours —rather than the first three or four digits, which dictate your region.

This means if your neighbours have a number of particularly bad accidents, your premiums could soar. Figures from insurer esure show innocent drivers living in the B31 postcode area of Birmingham saw their insurance premiums jump after a 300 per cent increase in claims in their area.

On top of hiking premiums, insurers are taking an increasingly hard line on claims.

Complaints about car insurance problems have increased by a quarter in the past year.

It has prompted the independent complaints adjudicator the Financial Ombudsman Service to warn insurers.

‘We have seen an increase in complaints where some insurers have rejected claims based solely on gut feelings,’ says chief ombudsman Natalie Ceeney. ‘We take a dim view of this and expect insurers to undertake a full investigation for each insurance claim made.’

A spokesman for trade body the Association of British Insurers says: ‘In recent years, motor insurers have faced unprecedented cost pressures from the rise in fraudulent and exaggerated personal injury claims, excessive legal costs and uninsured driving.

‘This is why the industry has campaigned for reforms to ensure all honest customers get the best possible motor insurance deal.’




this is utter bull imo.

your credit history and rating has nothing to do with how well/poorly you maintain your vehicle or how likely you are to claim!
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BCF's biggest cunt list: Cansa, Pits, Rob

[nowhere.elysium]

[G]

I wonder if they do have statistics to back this up?

I also wonder if the report has evidence to back up that it's happening in this way?

From experience on here we can see a lot of 'poorer' people are much less likely to claim - it's the rick people who can afford the increased insurance that will put through a small claim for the sake of ease.
But then people on here are (amusingly) relatively better 'educated' in such matter, to be fair.

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[Pete.]

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[nowhere.elysium]

It's a financial service, and they check your history of using financial services. This is neither surprising nor particularly unwarranted.

If you're paying your insurance on a monthly basis, you're making use of a loan to do so, hence the higher overall cost, and the credit checks.
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'10 SV650SF, '83 GS650GT (it lives!), Questionable DIY dash project, 3D Printer project, Lasercutter project

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[Pete.]

If they do run checks and it exposes a trend then they would be fully justified in making the checks. Equally, if the trend shows that, as you seem to infer, people with better credit ratings are a higher risk because they can afford the extra loadings then it's that bracket that will get loaded, not the poor-credit ones.
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a.k.a 'Geri'

132.9mph off and walked away. Gear is good, gear is good, gear is very very good

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[Pete.]

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also, is there a site where you can see your own postcode risk assesment? or whatever lol. be curious to see my postcodes report.
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BCF's biggest cunt list: Cansa, Pits, Rob

[G]

So what you're suggesting is that people need to spend more on daily living to get lower insurance premiums?

Just what those with bad credit history need!

[Pete.]

So you think that differentiating between people by their postcode is fairer than differentiating by fiancial risk, when financial risk is what they deal in?
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a.k.a 'Geri'

132.9mph off and walked away. Gear is good, gear is good, gear is very very good