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.
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The Wall Street Journal reports that the tax cuts and economic environment are prompting U.S. companies to go on a buying binge: “Mergers and acquisitions announced by U.S. acquirers so far in 2018 are running at the highest dollar volume since the first two months of 2000, according to Dealogic. Thomson Reuters, which publishes slightly different numbers, puts it at the highest since the start of 2007.”
Number of the Day: 5.5 Percent
Health care spending in the U.S. will grow at an average annual rate of 5.5 percent from 2017 through 2026, according to new estimates published in Health Affairs by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS).
The projections mean that health care spending would rise as a share of the economy from 17.9 percent in 2016 to 19.7 percent in 2026.
Trump Clearly Has No Problem with Debt and Deficits
A self-proclaimed “king of debt,” President Trump has produced a budget that promises red ink as far as the eye can see. With last year's $1.5 trillion tax cut reducing revenues, the White House gave up even trying to pretend that its budget would balance anytime soon, and even the rosy economic projections contained in the budget couldn’t produce enough revenues, however fanciful, to cover the shortfall.
The Trump budget spends as much over 10 years as any budget produced by President Barack Obama, according to Jim Tankersley of The New York Times. And it projects total deficits of more than $7 trillion over the next decade — "a number that could double if the administration turns out to be overestimating economic growth and if the $3 trillion in spending cuts the White House has floated do not materialize in Congress,” Tankersley says.
Trump — who once promised to both balance the budget and pay down the national debt — isn’t the only one throwing off the shackles of fiscal restraint. Republicans as a whole appear to be embracing a new set of economic preferences defined by lower taxes and higher spending, in what Bloomberg describes as a “striking turnabout” in attitudes toward deficits and the national debt.
But some conservatives tell Tankersley that the GOP's core beliefs on spending and debt remain intact — and that spending on Social Security and Medicare, the primary drivers of the national debt, are all that matters when it comes to implementing fiscal restraint.
“They know that right now, a fundamental reform of entitlements won’t happen," John H. Cochrane, an economist at Stanford University’s Hoover Institution, tells Tankersley. "So, they have avoided weekly chaos and gotten needed military spending through by opening the spending bill, and they got an important reduction in growth-distorting marginal corporate rates through by accepting a bit more deficits. They know that can’t be the end of the story.”
Democrats, of course, have warned that the next chapter in the tale will involve big cuts to Social Security and Medicare. Even before we get there, though, Tankersley questions whether the GOP approach stands up to scrutiny: "This is a bit like saying, only regular exercise will keep America from having a fatal heart attack, so, you know, it's ok to eat a few more hamburgers now."
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Margot Sanger-Katz and Jim Tankersley in The New York Times: “The deal struck by Democrats and Republicans on Monday to end a brief government shutdown contains $31 billion in tax cuts, including a temporary delay in implementing three health care-related taxes.”
“Those delays, which enjoy varying degrees of bipartisan support, are not offset by any spending cuts or tax increases, and thus will add to a federal budget deficit that is already projected to increase rapidly as last year’s mammoth new tax law takes effect.”
IRS Paid $20 Million to Collect $6.7 Million in Tax Debts
Congress passed a law in 2015 requiring the IRS to use private debt collection agencies to pursue “inactive tax receivables,” but the financial results are not encouraging so far, according to a new taxpayer advocate report out Wednesday.
In fiscal year 2017, the IRS received $6.7 million from taxpayers whose debts were assigned to private collection agencies, but the agencies were paid $20 million – “three times the amount collected,” the report helpfully points out.
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