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Massachusetts auto insurance rate mandates up for debate

Contrary to the practices in many states across the country, automotive insurance companies are not allowed to use an individual’s credit score when deciding what their auto insurance rates will be in Massachusetts.

While the current system bans the use of socioeconomic factors such as credit scores, education and occupation to determine a person’s auto insurance rates, it is only a state regulation, not a law. However, the current structure may be up for debate in the next election if the Massachusetts Association of Insurance Agents has its way.

The group recently filed a proposed ballot question that would take the current ban and make it a law, thereby making it much more difficult to be fought or overturned. In order to get the proposal onto the 2012 ballot the MAIA would need to collect 70,000 signatures from state residents – a feat not easily achievable done.

The insurance agents group believes that companies should base a person’s rates on their driving record, not their social status. If the companies had their way, they could potentially give a Harvard graduate with a history of speeding a better rate than an individual who did not go to college, but has a clean driving history, according to the paper.

Additionally, more than 70 percent of credit reports have some sort of error on them, possibly hurting a person’s ability to receive coverage by no fault of their own.

In stark contrast to the MAIA’s current ballot proposal, House Majority Leader Ron Mariano has introduced a bill that would lift the existing ban, but place restrictions on the ways in which companies could use a person’s score. Both proposals are going to be aired in a public meeting in October and the results may affect car insurance quotes in the state.

Many of the insurance companies were taken by surprise when the ballot to make the credit ban a law popped up, saying that the ban does not seem to be in any sort of jeopardy and the state legislators do not seem to be behind Mariano’s bill.

In fact, if the ballot becomes law it may negatively affect individuals who receive discounts for being a good student or belonging to an alumni association because the wording would include those things are socioeconomic factors.