Large breaches of consumers’ personal information are becoming more and more common and, in response, some consumers are placing freezes on their credit information.
We've heard from some consumers that after placing a credit freeze, it's affected their insurance premiums. If you get an adverse action notice from your personal auto, homeowner, condo, mobile and manufactured home and/or renter insurance company telling you your premiums are going up because you froze your credit, file a complaint with our office. We will find out if your company can do that. Regardless, the company must:
- Notify you via an adverse action notice.
- Tell you specifically why they're raising your premiums.
As of September 2018, the federal government passed a protective law (15 U.S.C. § 1681) that does not allow credit reporting agencies to charge you for placing a security credit freeze on your credit report. The new law also allows insurance companies to review your credit report for underwriting insurance purposes without lifting the security freeze.
Here are some frequently asked questions we've received from consumers on this issue:
What is the difference between no hit, no score and a credit freeze?
- No hit: The consumer does not have a credit history.
- No score: There’s not enough information to determine the consumer’s credit history.
- Credit freeze: A consumer has a credit score but contacted the credit bureaus to block anyone from accessing the information to reduce identity theft and fraud.
Why does the insurance commissioner allow insurance companies to use consumers’ credit scores?
Commissioner Kreidler has been a vocal opponent to companies’ use of credit information as a factor in setting consumers’ premiums. He tried to ban this practice in our state, but the state Legislature allows the practice to remain in place.
Insurers are not required to use credit scores, but most do. If they do, they must check consumers’ credit scores every three years for two reasons:
- To make sure consumers credit information is consistently updated.
- To give better premiums to consumers’ whose credit has improved.