Use of Credit Scoring to Continue

On July 8, in a highly anticipated ruling, the Michigan Supreme Court decided that carriers in the state may continue to use credit scores to partially determine an individual’s auto and homeowner’s insurance premium. The practice has been used in Michigan since the late 1990s, but became a dispute in 2005 when the Insurance Commissioner attempted to ban the practice.

The Michigan Insurance Code allows the practice of credit scoring. The Court ruling argued, therefore, that use of the practice does not violate the Code and is not discriminatory, as opponents have stated.

Insurers have long maintained that individuals with higher credit scores tend to be more responsible drivers and homeowners, while opponents believe that driving records and loss histories are the only factors that should be considered when determining rates. 

It remains to be seen if the two sides, along with state legislators, will come together to make the process more understandable to policyholders and more uniformly applied by insurers. That would be a winning endeavor for all.