The plight of a local woman from the town of Clermont regarding her auto insurance premium has resulted in a fierce debate over the use of credit reports in determining insurance rates.
Kimberly Abbes, a 40-year old cosmetologist living in Clermont, Florida, was surprised to see her insurance premiums go up by 50 percent this year. Abbes claimed that she did not incur traffic tickets or was convicted because of traffic violations. She also stayed clear of traffic accidents and paid for car insurance policy on time last year. For the past 12 months, she has also avoided filing for any claims, believing that all these would slash her premiums considerably. This year, however, Abbes has to contend paying significantly more for the same level of protection and coverage she acquired in previous years.
Abbes challenged her auto insurance provider several times, refusing to pay for what she said was an unfair rate. She even aired her complain to Gov. Charlie Crist’s office and state regulators. When she approached her insurers, however, she was told that her higher premium was due to her worsening credit score. The revelation further infuriated Abbes and soon after, state regulators and government officials took notice of the case and are now calling for sweeping changes to state regulations governing insurance companies.
Consumer rights advocates are also calling on the state and federal government to issue changes to the current provisions, which allow providers to look at policyholders’ credit reports when determining rates. Critics of the controversial practice say that the policy is unfair and unjust because lower credit scores are not the result of mismanagement or financial irresponsibility, but of the poor performance of the U.S. economy.
Consumer advocates also argue that tougher economic times are forcing banks and creditors to tighten their belts and slash credit lines of millions of consumers, automatically resulting in lower scores. This means that policyholders in the state of Florida can expect their insurance premiums to balloon significantly. According to recent studies conducted by financial firms, credit scores have dropped by an average of 10 points, especially in recession-hit states like Florida.
Walter Dartland, a Talahasee-based consumer advocate, says that the current economic environment is making it almost impossible for car owners to shoulder any more added expenses. Dartland points out that double-digit unemployment figures and floundering industries are leading to more hardship for car owners and policyholders already struggling to survive the recession. Slapping on costly insurance would only make things worse, he adds.