Insurers do credit checks to charge poorer motorists more

Credit checkCar insurance providers are being accused of doing secret credit checks on motorists. The credit checks are claimed to give insurers more detailed information about the kind of driver a motorist is. The worst part about this is that they are allegedly using the information to determine which drivers are more likely to make an injury claim so that they can increase premiums, which are already high.

Car insurance premiums have significantly increased over the last ten years, but insurance firms are still looking for ways to make more money due to the huge gap in their profits that will be left by new European Union regulations. From 21 December, insurers will be banned from basing premiums on the gender of the policyholder. Then next year, they will be banned from taking payoffs for passing the details of accident victims onto no-fee, no-win law firms or claims management firms.

To make back some of the money they will be losing, insurers are said to be looking at drivers’ credit in a bid to determine how much a motorists should pay for insurance. Credit records contain personal information – everything from utility bills to repaying debts and credit cards. It’s theorised that motorists with low credit scores are more likely to have a hard time covering for the cost of vehicle repairs. Because of this, they are believed to be the most likely to make a claim so the insurer is left with the repair bill.

The trick has been revealed by This is Money as concerns rise that valid insurance claims are being rejected because the insurer feels they are lying. The independent ombudsman has issued a strong warning about the issue. Chief ombudsman Natalie Ceeney says they have seen a rise in complaints about insurers rejecting claims based only on the feeling that they are fraudulent. They don’t agree with this and expect insurance companies to fully investigate each claim.

Consumer Action Group founder Marc Gander says that this is more than shocking. Insurance companies are saying less well off drivers are riskier. He doubts that there are any real statistics to prove this. Insurers are just looking for other ways to charge motorists more.

Aviva has confirmed that it runs credit checks on customers in a bid to decide what kind of premium they should be offered. A spokesman said that they use public and personal information to verify customers, assess insurance risk, offer credit or finance, and prevent fraud. The credit searches only leave a mark on a consumer’s file if it’s done to decide if they can make monthly premiums.

The British Insurance Brokers’ Association (Biba) insists there’s nothing to be worried about. Head of corporate affairs Graeme Trudgill says the trade body is already aware of several large insurance providers who run credit checks to calculate premiums. They are looking into the checks to learn about how they are used and to issue guidance to broker members. They just want to confirm how it works, so this isn’t an investigation.

Trudgill continued to explain that they are in talks with insurers about how they are doing the credit checks and calculating premiums in a technical briefing. The firms are doing it, and Biba is gathering information about the process. They want to ensure they can inform members about how the checks work, what impact they have and if all insurers do it the same way. He added that credit checks are common on price comparison websites.



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