Aug 12, 2009 7:14 pm US/Eastern
Consumer Alert: Insurance Profiling
Not Just Catastrophic Occurrences Can Cause Your Rates To Rise; Companies Looking Into Credit Scores
LEBANON, N.J. (CBS) ―
Consumers today are fighting to keep every dollar they can in their wallets. Yet too often companies figure out how to charge more regardless.
CBS 2 HD has uncovered a disturbing new way insurance companies are profiling homeowners, frequently to charge more for coverage.
Cindy Dight was terrified two weeks ago when a rain storm ravaged her town.
"It was the scariest day of my life. It looked like an ocean was coming in," she said.
The four inches of rain roared across her driveway, tearing it up, digging a trench along her home, cracking the foundation, and pouring four feet of water in the basement.
It ran her about $11,000 in damages.
The town's drainage failed and her insurance company won't pay. But they did raise her rates by $400.
"I definitely feel like the squeeze is on," Dight said.
And it's not just catastrophic flooding that can raise an insurance rate. They're delving into credit scores and all too often they're finding a reason to ask for more money.
"A consumer is charged 30 percent more on his insurance policy because of credit inquiries made that had nothing to do with his insurance policy," said Chuck Bell of Consumer's Union.
Bell said the practice has become an increasingly popular way to profile customers.
"If you've missed a payment perhaps to a department store credit card an insurance company can increase your premium," Bell said. "This patently unfair and unjust and should be banned completely and they should not be looking into a credit file."
To fight back get your annual free credit report from Annual Credit Report.com. Correct any mistakes, and start to repair anything that is impacting your score negatively. And Bell said call on your congressional representatives.
New York, New Jersey and Connecticut all have bills to ban the practice of using credit scores to set rates. But Consumer's Union said it is facing stiff opposition from various insurance companies.
(© MMX, CBS Broadcasting Inc. All Rights Reserved.)
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