The Shocking Secret About How Your Car Insurance Rate Gets Set
Most drivers probably know that if they get into an accident, their insurance rates are also likely to take a hit. But a new analysis by Consumer Reports finds that your car insurance premiums are increasingly based on factors such as your credit score that are unrelated to your driving record.
How well you drive may actually have little connection to how much you pay for insurance, the consumer group found.
In a two-year investigation, Consumer Reports analyzed more than 2 billion insurance price quotes obtained from more than 700 insurers across the country. It found that in many states a bad credit history will drive up your insurance premiums more than a drunk driving conviction.
“What we found is that behind the rate quotes is a pricing process that judges you less on driving habits and increasingly on socioeconomic factors,” the consumer organization reports. “These include your credit history, whether you use department-store or bank credit cards, and even your TV provider. Those measures are then used in confidential and often confounding scoring algorithms.”
Consumer Reports says it found that most car insurance companies use about 30 elements of the nearly 130 available in a credit report to construct their own secret score for policyholders, and that credit scores could have more of an impact on premiums than any other factor. Drivers with the best credit scores were charged up to $526 less than similar drivers with only “good” scores, depending on where they lived. Only three states — California, Hawaii and Massachusetts — prohibit insurers from factoring in credit scores when setting prices.
Drivers are legally required to carry car insurance, but the lack of pricing transparency makes it harder for them to make informed decisions about which policy to buy. “Because insurance companies are under no obligation to tell you what score they have cooked up for you, you have no idea whether you have a halo over your head or a bull’s-eye on your back for a price increase,” Consumer Reports says.
Industry advertising that promotes special discounts, such as for bundling home and car insurance, only muddles the purchasing process because those special deals don’t actually save people much money, Consumer Reports found.
The organization says it’s high time for truth in car insurance, and it’s asking consumers to sign a petition demanding that insurers -- and the state regulators who oversee them -- use price-setting practices that are tied to more meaningful factors, like driving records. It is also asking consumers to tweet the National Association of Insurance Commissioners, @NAIC_News, and tell them to “Price me by how I drive, not by who you think I am! #FixCarInsurance.”
For more information on state-by-state insurance premiums, or to sign the Consumer Reports petition, go to ConsumerReports.org/FixCarinsurance.
Top Reads From The Fiscal Times:
- Americans Are About to Get a Nice Fat Pay Raise
- How Millenials Could Damage the U.S. Economy
- The Pain the Job Numbers Don’t Show
Wages Are Finally Going Up, Sort of
Average hourly earnings last month rose by 2.9 percent from a year earlier, the Labor Department said Friday — the fastest wage growth since the recession ended in 2009. The economy added 201,000 jobs in August, marking the 95th straight month of gains, while the unemployment rate held steady at 3.9 percent.
Analysts noted, though, that the welcome wage gains merely kept pace with a leading measure of inflation, meaning that pay increases are largely or entirely being canceled out by higher prices. “The last time unemployment was this low, during the dot-com boom, wage growth was significantly faster — well above 3.5 percent,” The Washington Post’s Heather Long wrote. The White House Council of Economic Advisers this week issued a report arguing that wage gains over the past year have been better than they appear in official statistics.
Cost of Trump’s Military Parade Rising Fast
It looks like President Trump’s military parade is going to cost a lot more than the initial estimate suggested – about $80 million more.
The Department of Defense pegged the cost of the parade at roughly $12 million back in July, but CNBC reported Thursday that Pentagon officials have increased their estimate to $92 million. The total consists of $50 million from the Defense Department and $42 million from other agencies, including the Department of Homeland Security.
The parade, which President Trump requested after attending a Bastille Day military parade in Paris last year, is scheduled for November 10 and will reportedly include aircraft, armored vehicles and soldiers in period uniforms. Abrams tanks, which weigh roughly 70 tons apiece, will also be included, CNBC said, despite concerns about heavy military equipment ripping up the streets of Washington. A Pentagon analysis apparently found that the armored vehicle’s treads would not cause any damage.
The parade is expected to begin at the Capitol, continue past the White House and end at the National Mall, according to earlier reports from NBC News.
Quote of the Day: Time to Raise Taxes?
“Tax revenue as a percentage of gross domestic product is expected to be 16.5 percent next year. The long-term average in a full-employment economy is 18.5 percent of GDP; if revenue were at that level for the coming decade, debt would be $3.2 trillion lower and the 10-year fiscal gap would be halved. Returning to past revenue levels, however, will be inadequate over time, because an aging population will increase Medicare and Social Security costs. This need not pose a problem: Revenue was roughly 19 percent of GDP in the late 1990s, and economic conditions were excellent.”
– Former U.S. Treasury Secretary Richard E. Rubin, writing in The Washington Post
Quote of the Day: When Tax Cuts Pay for Themselves
“You … often hear the claim that a lot of tax cuts will ‘pay for themselves,’ that they’ll cause so much additional economic activity that the revenue feedback from that activity will fully offset the direct revenue loss caused by the tax cut so that you end up making money for the federal government, or at least not losing any money. Now, of course that is theoretically possible and it would happen at extreme rates. I mean if a country had a 99 percent flat rate income tax and lowered it to 98 percent, I believe that they almost certainly would collect more revenue at the 98 percent rate than they did at the 99 percent rate. But the idea that this type of effect would occur at today’s tax levels just requires responses that are much bigger than statistical evidence would support and I think much bigger than common sense would indicate if you just ask people how they themselves would react to the tax cut.”
-- Alan Viard, tax policy expert at the American Enterprise Institute
Map of the Day: Gas Taxes
It’s summertime and the driving is anything but easy if you want to get to your favorite beach or mountain cabin for a well-deserved break. As lawmakers consider a plan to raise federal fuel taxes by 15 cents a gallon, here’s a look at the current state-level taxes on gasoline, courtesy of the Tax Foundation:
