Using credit scores to determine insurance rates is ridiculous. They're simply not related to one another using any method other than junk science, illusory corollary.
A study by the Casualty Actuarial Society shows that people with prior driving violations or accidents and good credit have much better loss ratios than people with clean driving records and bad credit. And another study says there is a "significant relationship" between credit scores and filed insurance claims. And another study, study after study, all show the same thing, but the problem is, there has really been no independent study of the issue. All the studies and the numbers come from insurers or the vendors of the scores. Its hard to trust them because all of these companies have a vested interest in seeing (insurance scoring) continue. Follow the money. Always follow the money.
But even if there is a real, actual correlation, the insurance companies can't explain why that is. Just because you can correlate something doesn't mean you should use that as the basis to set rates or determine if a policy will be issued. What about the risk of drivers who watch Wife Swap and Honey Boo Boo versus those who watch NCIS? Fox News versus MSNBC? Give me your Facebook password so I can decide if you're a bad risk or not.
Age, how long you've been licensed, gender, where you live, how you use your car (how many miles you drive to work or annual mileage), the car's cost, and your driving record used to be the seven things that determined rates. Now, over the past decade or so, coincidentally as the economy has tanked, most auto insurance companies have introduced "income proxies" such as credit score, your highest level of education completed, and your occupation to determine whether you are eligible to receive the lowest rates. And it's all voodoo, arbitrary, and discriminatory. Except that it also plays right in to the idea of you being a good little citizen, paying your credit card bills on time, taking advantage of student loans to attain higher education, and having a good, high paying job so that you can continue to play the all-important role of good citizen with the financial and insurance industries, as they are tightly intertwined in an unholy tapestry. It's positive and negative reinforcement for being a good or bad citizen. Good kitty gets you catnip, bad kitty gets you sprayed with a bottle of water. But none of it has anything to do with your risk behind the wheel.
You know why they are doing it? In the eyes of your insurer, if you've missed a few payments to your credit card company or have written a lot of bad checks (that wound up in collection), chances are you'll do the same thing to them. So, they charge you more money to protect themselves, the insurer taking out an insurance policy that they'll get paid for the insurance plan they're selling you, and they want you to pay the premiums for their policy, too. They aren't nearly as worried about claims risk... they want their money.
