Online Auto Insurance: New Mass. Law Highlights Contentious Ratings Issue

Share Article

Gov. Deval Patrick recently fortified the state's ban on insurers' use of credit history in setting drivers' car insurance rates.

A new Massachusetts law that fortifies the ban on auto insurers’ use of consumers’ credit histories to help determine policy rates helps bring into focus the many factors that companies can take into account when setting monthly premiums, according to Online Auto Insurance (OAI).

Coverage providers use every tool at their disposal in order to calculate the risk of providing affordable auto insurance at a price that will cover the cost of future claims and other expenses and leave room for a profit.

That’s why insurers have long been in favor of using personal credit histories—including any information about late payments, bankruptcies and other blemishes—to help set rates. According to industry experts, that information helps insurers reliably predict risk and set their rates accordingly.

The new law, which supporters say will continue to prevent insurers from unfairly demanding higher payments from those who can least afford them, makes credit information off limits, however. The state is one of three nationwide—along with California and Hawaii—with bans on auto insurer use of credit histories for rating purposes.

Massachusetts previously had a regulatory ban on credit-scoring, but the enactment of the new legislation makes that ban more difficult to remove.

But even in states in which the practice is legal, a person’s credit history is only one of a broad range of items that insurers use in setting premiums.

Perhaps the most important factor is a person’s driving history. Those with few or no accidents and violations on their records tend to have lower premiums. Massachusetts officials say drivers who cause accidents or are hit with moving violations can expect to incur a surcharge and pay more for their coverage.


The number of miles a motorist puts on a vehicle annually also impacts premiums because those with below-average mileage are less likely to get into a vehicle crash, so insurers often reward them with lower premiums.

And the area where you live tells insurers a lot about their risk in writing a policy for you. That’s because the statistical likelihood of accidents, car thefts and lawsuits varies from place to place.

Also factored in is information such as a driver’s age and gender, plus the amount of coverage he or she buys from the company.

To learn more about this and other car insurance issues, readers can go to where they will find informative resource pages and a rate-comparison generator that can help users quickly evaluate their coverage options.


Share article on social media or email:

View article via:

Pdf Print

Contact Author

Gregor McGavin