Rant Mode: ON - Insurance company practices

[TheAdvocate]

Been calling around to get quotes on a new homeowner's policy as I've made some significant changes. Turns out that most of them won't give you a simple quote without pulling your credit.

Why in the fvck does an insurance company have to pull a credit report and ding your credit score just to give you a quote on a homeowner's policy???

What an abusive practice. My credit (which is good/excellent for the flame baiter crowd) has nothing to do with what I should pay for homeowner's insurance. It should be entirely based on the repair & replacement costs, basic risk factors (fire, etc), and local adjustments.

That whole industry is just FUBAR'd. I absolutely hate it with a passion.

 

[jadinolf]

Hard to believe but they associate your credit rating with your ability to accept responsibility.

Ridiculous, isn't it?

 

[Heisenberg]

Your entire life is based on your credit score. You pretty much have to deal with it or buy a cabin in Montana somewhere.

 

[Fingolfin269]

I agree. I don't understand why they pull your credit score for any kind of insurance to be honest. Maybe there has been some study linking the probability of home fire with a person's FICO?

 

[iamwiz82]

Originally posted by: Fingolfin269
I agree. I don't understand why they pull your credit score for any kind of insurance to be honest. Maybe there has been some study linking the probability of home fire with a person's FICO?

No, unpaid bills and credit score go hand-in-hand though.

BTW, most insurance companies have their own credit rating system.

 

[jupiter57]

Maybe....
If you were $500K in debt and trying to insure your home for $500K+?

I would think that would be something they would really want to know. (I am no insurance expert by any means, this is just what popped into my head as I read the OP.)

 

[TheAdvocate]

Originally posted by: jadinolf
Hard to believe but they associate your credit rating with your ability to accept responsibility.

Ridiculous, isn't it?

Interesting post there. Where exactly are they offering me credit? Insurance is pay as you go. No pay = no insurance. I miss a payment, they cancel it the next day. Why then is my credit score even relevent?

Awaiting your next flame.

 

[waggy]

actually im makes sense. as jupiter said i think they would want to know if you are in debt to the tune of hundreds of thousands when you are insuring your house. at least i sure would.

 

[TheAdvocate]

Originally posted by: waggy
actually im makes sense. as jupiter said i think they would want to know if you are in debt to the tune of hundreds of thousands when you are insuring your house. at least i sure would.

Now that wouldnt make sense. First, you cant file a claim to payoff a home loan (it has to be filed based on a loss events uch as a fire). And they dont have the home as collateral, so what you owe = meaningless. This is not a loan. Insurance is a prepaid service, not unlike cable TV in that regard. Second, if you are buying a home, the mortgage isnt even in place prior to closing, so how would they know anyway.

 

[BigJ]

Originally posted by: TheAdvocate

Originally posted by: waggy
actually im makes sense. as jupiter said i think they would want to know if you are in debt to the tune of hundreds of thousands when you are insuring your house. at least i sure would.

Now that wouldnt make sense. First, you cant file a claim to payoff a home loan (it has to be filed based on a loss events uch as a fire). And they dont have the home as collateral, so what you owe = meaningless. This is not a loan. Insurance is a prepaid service, not unlike cable TV in that regard. Second, if you are buying a home, the mortgage isnt even in place prior to closing, so how would they know anyway.

In the same regards, it's just like a cell-phone, but they do at the very least a soft inquiry on that.

 

[EagleKeeper]

Originally posted by: TheAdvocate

Originally posted by: jadinolf
Hard to believe but they associate your credit rating with your ability to accept responsibility.

Ridiculous, isn't it?

Interesting post there. Where exactly are they offering me credit? Insurance is pay as you go. No pay = no insurance. I miss a payment, they cancel it the next day. Why then is my credit score even relevent?

Awaiting your next flame.

Insurance is a pay as you go from your side of the fence.

However, if you make a claim, they are the ones on the hook.
If you have a credit problems, then the potential may exist for filing a false/inflated claim.

Look at some of the rip-offs that are attempted each year by hurricane victims.

 

[Queasy]

They take a look at your credit report so that they can see what kind of credit risk or non-risk you might be and generate a quote that would be applicable to you. This is no different than utility or cable companies looking back at your history to determine if you need to make a security deposit or insurance companies looking at your driving record to determine your car insurance quote.

Insurance companies have to manage the risk of those that they insure. If they don't, they risk not being profitable.

 

[TheAdvocate]

Originally posted by: BigJ

In the same regards, it's just like a cell-phone, but they do at the very least a soft inquiry on that.

Cell phone companies, who also aren't making you a loan, shouldn't do it either. But at least they can claim that they sell you a contract price for two years or whatever. Insurance is prepaid, for six months or whatever. To compare to cell phones, you'd have to prepay for the entire contract period.

The point I'm making here is that non-creditors are abusing this already privacy invasive service for non-credit situations. I cant remember what it was, but someone actually wanted to pull my credit for a cash transaction a couple months ago. I thought he was joking. This has got to stop. Down with corporate Big Brother.

 

[waggy]

Originally posted by: TheAdvocate

Originally posted by: waggy
actually im makes sense. as jupiter said i think they would want to know if you are in debt to the tune of hundreds of thousands when you are insuring your house. at least i sure would.

Now that wouldnt make sense. First, you cant file a claim to payoff a home loan (it has to be filed based on a loss events uch as a fire). And they dont have the home as collateral, so what you owe = meaningless. This is not a loan. Insurance is a prepaid service, not unlike cable TV in that regard. Second, if you are buying a home, the mortgage isnt even in place prior to closing, so how would they know anyway.

actually wrong.

you can have the house insured for more then its worth. so if the house is worth $200k you can have it insured for $500+k (plus stuff inside etc). so it burns down . they pay off the house and give you a check for the remander.

now you are not only out of the loan you have a few $100k to pay off bill etc.



while the odds on it happening are slim it has happened.

 

[TheAdvocate]

Originally posted by: EagleKeeper

Originally posted by: TheAdvocate

Originally posted by: jadinolf
Hard to believe but they associate your credit rating with your ability to accept responsibility.

Ridiculous, isn't it?

Interesting post there. Where exactly are they offering me credit? Insurance is pay as you go. No pay = no insurance. I miss a payment, they cancel it the next day. Why then is my credit score even relevent?

Awaiting your next flame.

Insurance is a pay as you go from your side of the fence.

However, if you make a claim, they are the ones on the hook.
If you have a credit problems, then the potential may exist for filing a false/inflated claim.

Look at some of the rip-offs that are attempted each year by hurricane victims.

Then look at my claims history. I have no problem with that. My credit has nothing to do with this transaction.

 

[TheAdvocate]

Originally posted by: waggy
actually wrong.

you can have the house insured for more then its worth.

So what? That's what you paid for. What you owe on the house doesnt matter at all. Their liability is limiuted by the amount you insured, an amount that you pre-negotiated and are paying a premium for. The quote I just got had an additional premium for 125% replacement coverage. I'm paying for, I get it. What I owe on my home loan is irrelevent.

 

[waggy]

Originally posted by: TheAdvocate

Originally posted by: waggy
actually wrong.

you can have the house insured for more then its worth.

So what? That's what you paid for. What you owe on the house doesnt matter at all. Their liability is limiuted by the amount you insured, an amount that you pre-negotiated and are paying a premium for. The quote I just got had an additional premium for 125% replacement coverage. I'm paying for, I get it. What I owe on my home loan is irrelevent.

sigh nevermind. i see you refuse to see other argumetns on WHY they need to check out the credit for it.

fight the man though! don't get insuranceon the house!

 

[altonb1]

Originally posted by: EagleKeeper

Originally posted by: TheAdvocate

Originally posted by: jadinolf
Hard to believe but they associate your credit rating with your ability to accept responsibility.

Ridiculous, isn't it?

Interesting post there. Where exactly are they offering me credit? Insurance is pay as you go. No pay = no insurance. I miss a payment, they cancel it the next day. Why then is my credit score even relevent?

Awaiting your next flame.

Insurance is a pay as you go from your side of the fence.

However, if you make a claim, they are the ones on the hook.
If you have a credit problems, then the potential may exist for filing a false/inflated claim.

Look at some of the rip-offs that are attempted each year by hurricane victims.

Fine...prosecute the FRAUD and let the average person pay for insurance based on the value of the property being insured. There are a lot of legitimate reasons why someone's credit may have suffered a setback--unplanned medical bills, loss of job, etc. Those are unfortunate situations that happen every day. Why punish the person 2-3 or more years later for a few bad months? Especially when it comes to pay-as-you-go things like insurance?

I agree with the OP. The reason my property insurer is not also my auto insurer is directly based on the fact that they use credit scores as a basis for auto insurance rates. My credit sucked for a bit after 9/11 because I was out of work. I have been at the same job now for over 4 years and doing very well. However, my credit score is still lower than I would like and when factored into insurance rates, I take a hit. So I went to GEICO and am happy with them.

 

[TheAdvocate]

Originally posted by: waggy

sigh nevermind. i see you refuse to see other argumetns on WHY they need to check out the credit for it.

No, I see them. They just don't make any sense. If you're worried about pre-detecting fraud, then check my claims history, which they have.

Again, there is no reason to check credit on non-credit transactions.

 

[JS80]

It's simple. Bad credit = high risk of FRAUD.

 

[WW]

If you have to file a major claim, they ask all sorts of questions about your financial status!

As stated before, the insurance company has to cut you a check if you have, say a theft claim. Someone that is headed for bankruptcy or foreclosure could get new insurance, then fake a major theft (brick + moving items out) for a quick payoff.

Insurance fraud happens allllllll the time, and the insurance company needs to research every new customer completely to protect itself.

 

[BigJ]

Originally posted by: TheAdvocate

Originally posted by: waggy

sigh nevermind. i see you refuse to see other argumetns on WHY they need to check out the credit for it.

No, I see them. They just don't make any sense. If you're worried about pre-detecting fraud, then check my claims history, which they have.

Again, there is no reason to check credit on non-credit transactions.

Say the insurer pays out $500k and later finds out there's fraud. How easy do you think it is to recoupe that money? It's damn near impossible. Or say it's even relatively low, like $10,000. Again, damn near impossible to recoupe that many.

 

[EagleKeeper]

Insurance is based on the expenses/exposure of risk of a claim.
Premiums reflect such risk.

If you do not like the way the insruance company determines the risk, then go to another.
You may end up paying a higher premium accodingly and/or not having insurance.

Self insure if you do not like the rules.

 

[Fingolfin269]

Why do so many of you continue to compare insurance with utility companies (cable/cell phone/water/etc.) when it comes to checking a person's credit score? The two are not the same.

With insurance you pay and then you receive the service. If you do not pay your premium and your house catches on fire then tough luck.

With utilities you pay based on usage. I receive a cell phone bill based on the prior month's usage and the same goes for all of my utilities. In essence these utility companies are offering me credit in good faith based on their belief that I will pay them for the service.

So, basically you have your credit checked for risk when it comes to utilities and your deposit is a reflection of this risk since the service is rendered prior to the payment.

Now, if someone can give me a REAL (not a theory) reason why your credit is checked by the insurance company other than to be used against you as some BS reason to increase your rates then please fill me in.

 

[Queasy]

Originally posted by: Fingolfin269
With utilities you pay based on usage. I receive a cell phone bill based on the prior month's usage and the same goes for all of my utilities. In essence these utility companies are offering me credit in good faith based on their belief that I will pay them for the service.

Believe it or not, there is a database of utilities out there where utilities will share the history of consumers. It is by no means complete but the utilities use this to determine whether or not you are a risk and whether or not you should have to pay a security deposit or some other terms be added to your service.