Search for MY Senator
President Pro Tempore Jonathan Dismang
President Pro Tempore
Arkansas Senate
State Capitol
500 Woodlane St. Ste 320
Little Rock, AR 72201-1090

In Session Phone:
501-682-2902

Out of Session Phone:
501-682-6107

Senators Contact Info:
Link to Profiles

91st General Assembly
Senator Seniority Listing
Senate Committe Assignments

Credit Scores Probably Affect Your Insurance Premiums

Download attachments: The following readers may be required for linked documents:
Adobe Reader | MS Word Viewer
LITTLE ROCK - Consumers' credit scores influence the premiums they pay for most of the insurance policies written in Arkansas for motor vehicles and homes.
In the past 12 months, almost half the people who bought car insurance got lower premiums because of their good credit scores. More than a third of those who bought homeowners insurance had lower premiums because of good credit.
The legislature requires insurance companies to report to the state whether the use of credit scores drives up or holds down the cost of premiums. The state Insurance Department compiles the information and reports to the Legislative Council and the Insurance and Commerce Committees.
The state has required annual reports on the effect that credit scores have on premium prices since the passage of Act 1452 of 2003. Some legislators expressed concern that the use of credit scores to set prices was not fair to consumers who may be a good risk, but have had financial problems.
Spokesmen for insurance companies said their research clearly demonstrated that people's credit scores indicate how likely they are to file claims. For example, people with poor credit are more likely to buy insurance on a month-to-month basis, and are more likely to let their insurance lapse.
According to this year's report by the Insurance Department, the use of credit scores resulted in a decrease in premiums for 48 percent of motor vehicle policies in Arkansas. The use of credit scores lowered premium prices for 34.2 percent of homeowners' policies and had no effect on the premiums in 37 percent of policies.
For about 15 percent of customers, their credit scores were a factor in their car insurance premiums going up. For about 10 percent of homeowners, credit scores caused an increase in premiums and for 55 percent credit scores had no effect.
Insurance policies covering motor vehicles greatly outnumber those for homeowners. In Arkansas last year, more than 2 million automobile policies were written and more than 612,000 homeowners' policies were written.
Of all the personal lines written for Arkansas residents last year, the cost of 95.5 percent relied partly on credit scores. Under Act 1452, a person's credit score cannot be the sole factor in determining whether someone can obtain a personal line of insurance, or in the pricing of premiums. Insurance companies may factor in a consumer's history of filing claims, the value and location of specific property and a person's driving record.
Medical Malpractice Rates
The Insurance Department also submitted its annual report to the legislature on the medical malpractice insurance market in Arkansas. It is required by Act 1007 of 2003, which in part was passed to gauge the effects of tort reform.
The effect of tort reform on medical malpractice insurance premiums is more difficult to gauge. For one thing, malpractice lawsuits often take a long time to reach a conclusion and they cost a lot more to litigate because of the number of expert witnesses and the complexity of the testimony.
The Insurance Department reports that there have been four filings by companies that want to offer new programs. There is now a total of 16 companies that write medical malpractice policies in Arkansas, or are seeking new business in the state.

 


© 2013 Arkansas Senate. All Rights Reserved.