Iowans uninformed about the cost drivers of auto insurance
Misunderstandings about credit scores and auto insurance premiums abound
There is widespread lack of understanding among Iowa drivers about auto insurance company practices, a survey by St. Ambrose University found.
The Davenport, Iowa university polled 1,240 Iowans about auto insurers’ use of credit scores. Seventy percent of survey respondents felt that calculating premiums with the help of credit scores was unfair, even though the vast majority – 92 percent – of auto insurance companies do so.
Randy Richards, chair of the managerial studies department at the university and a co-author of the study, said in an interview with the Des Moines Register that credit scores are predictive of insurance claim filings. But only 14 percent of survey respondents agreed, suggesting that consumers are not well-informed about actuarial practices.
If consumers “knew what they could do to improve their own scores” and lower their insurance premiums as a result, said Richards to the paper, “I would think more people would think [the practice] is fair.”
The study was drafted with the help of Angel Robinson, Iowa’s consumer insurance advocate. She has been holding hearings around the state to gauge Iowans’ feelings about insurers’ incorporation of credit scores into actuarial data, the Register reports.
“I was not completely surprised when I saw the survey results,” Robinson was quoted as saying.
Richards added that drivers, in addition to improving their credit scores, can drive less and drive safer to reduce their auto insurance costs.
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Posted: December 9, 2009
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