Laser-guided Red-lining

Here's another article on an issue that burns me up. Auto insurers are using customers' credit ratings as a factor in pricing their insurance. The upshot — poor people pay more than rich people do. (See this earlier post.)

As James Baldwin says, "It's expensive bein' poor." And it's not just auto insurance. More and more, credit rating is being used for all kinds of things other than extending credit. And in every case, what it means is that people with low credit scores (i.e., the poor) are charged more for the same services than people with high credit scores (i.e., the wealthy). This is ass-backwards, unjust, illogical.

But consumer groups aren't buying the link between your credit data and your driving record. And they say it's unfair to punish people who suffer unexpected financial woes with higher insurance rates. Say you get sick and get slammed with high hospital bills, or you lose your job or get divorced, why should you have to pay higher premiums on your car on top of everything else?

"The part that gets me is blaming the victim. They're trying to blame people who've been victims of financial or medical catastrophes," says Birny Birnbaum, executive director of the Center for Economic Justice in Austin, Texas. "The notion that you would penalize people like that with higher auto and homeowner insurance rates is unconscionable."

Exactly. Insurers argue that credit ratings are a reliable indicator, and there is a high correlation between lower credit ratings and more frequent insurance claims. Right. No actuary worth their abacus would accept the slipshod and arbitrary junk mathematics of the credit rating system as the basis for any defensible calculations.

They may as well use the signs of the Zodiac and then claim that "studies show a high correlation between Capricorns and higher claims, therefore we're justified in charging them higher rates."

All this amounts to is a higher-tech, laser-precision version of redlining. You're no longer allowed to fleece poor and minority people based on neighborhood demographics, so instead you fleece them one-by-one, based on their credit scores.