Bill Would Affect Virginia Auto, Fire Insurance

A state lawmaker from Spotsylvania County wants to stop the insurance-industry practice of charging more for certain types of coverage just because of a person's bad credit.

Republican Del. Mark Cole recently prefiled a bill for the 2018 General Assembly session that would prohibit companies from using credit histories and scores as factors in determining a consumer's auto and fire insurance premiums.

Credit scores can dramatically impact insurance rates.

A Virginian with a clean driving record but poor credit pays an average of $2,566 annually for car insurance, or about $1,500 more than a driver with excellent credit, according to Consumer Reports. In fact, the average rate for someone with bad credit is about $500 more than the cost for a person with excellent credit and a drunken-driving conviction.

Cole said he proposed the bill at the request of a constituent, who he said thinks it's unfair for credit scores to influence certain premiums. If approved, the legislation will take effect January 2019.

"I don't see the nexus between your credit rating and what you pay for your car insurance," Cole said.

A person's age, gender, marital status and driving record also impact car insurance premiums. The average yearly rate in Virginia stood at $743 in 2014, making it the 19th least expensive state for car insurance, according to the Insurance Information Institute.

A 2007 Federal Trade Commission report found that credit-based rates cause African-Americans and Hispanics to pay more because they tend to have lower credit scores than whites and Asians. But the study also determined that credit scores do "effectively predict" the number and cost of claims consumers submit.

Just three states - California, Hawaii and Massachusetts - prohibit credit-based premiums for car insurance.

Jim Whittle, associate general counsel for the American Insurance Association, defended the practice in an interview, calling credit scores a "useful and proven" way to assess a person's risk.

He added that some insurance companies place more weight on a person's credit than others.

"It's a competitive marketplace," Whittle said, and people can find companies that "use other methods of analyzing risk."

Cole is not the only lawmaker to propose legislation ahead of the session that kicks off Jan. 10.

State Sen. Scott Surovell, a Democrat whose 36th District includes parts of Stafford County, recently submitted a bill that would increase the threshold for felony grand larceny from $200 to $500.

Under the bill, someone accused of stealing less than $500 would be charged with misdemeanor petit larceny rather than a felony.

Similar legislation has failed in previous sessions after facing opposition from retailers and public safety groups.