New research from @cplusc.bsky.social & @consumerfed.bsky.social shows that average across the US it is MORE EXPENSIVE to have a poor credit score than to live in a zip code with a high disaster risk: climatecommunityinstitute.substack.com/p/insurers-c...
How is this legal? Oh yeah citizens United.
Well, my credit score went way up, and so did my insurance.
That sucks! To be clear, the research doesn't say this won't also happen. It says that, on average, homeowners with lower credit scores will pay more than those with higher scores.
I assume there is high correlation between low credit score and claims/fraud hence the additional cost
Insurers certainly claim this, though the claim is hard to evaluate because insurers don’t make that data available. But even if it were true, pricing for losses is different from pricing for disasters...
As collaborator Nick Graetz writes: "Pricing for losses may generate an inadvertent signal about disaster risk to the extent these happen to overlap, but there is no guarantee this will happen—especially when...
...as we show in our study, insurers assign such large price effects to factors like credit score that clearly have no causal relationship with insured events like hurricanes, hail, and tornadoes." Full blog here: climatecommunityinstitute.substack.com/p/insurers-c...
Insurers charge the typical consumer twice as much per year—approximately $2,000 more—in premiums simply for having a low credit score, though this varies greatly state by state. Check out the interactive map to see the credit score penalty in your county: datawrapper.dwcdn.net/wq2vT/3/
Insurers often claim that premium prices are a good signal of disaster risk & an incentive to mitigate that risk. But by placing more focus on credit scores than climate risk, insurance companies effectively allow homeowners to compensate for living in a high risk area by having high credit.
The use of credit scores by insurers also shows how seemingly objective technologies encode racism. Racist practices such as redlining, for example, have inhibited Black households from building wealth and credit. For more on this see: www.ruhabenjamin.com/race-after-t...
Ultimately, as lead researcher Nick Graetz writes, "if there is a price signal related to disaster risk in the home insurance market, it is currently targeted towards those with the least resources to do anything about it." climatecommunityinstitute.substack.com/p/insurers-c...
What to do about this credit score penalty? To start, states should: 1. prohibit insurers from using credit scores & credit history in pricing homeowners’ insurance 2. require insurance companies to file public disclosures that provide greater transparency on their pricing models. Ultimately...
...as climate change worsens & disasters become more frequent, we need to fundamentally rethink how we distribute risks to homes, how we share costs, and how we build more equitable, effective, publicly-owned models to reduce disaster risk: climateandcommunity.org/research/sha...
Just criminal.