Insurer will check credit to set home policy price

DEERFIELD BEACH — If you have bad credit and buy homeowner’s insurance from People’s Trust Insurance Co., plan on paying more.

The Deerfield Beach-based insurer intends later this year to start running credit checks on new and renewing customers, according to plans filed with state regulators.

Unless the plan is rejected, People’s Trust will begin levying surcharges on customers who have fallen behind or stopped paying bills unrelated to their insurance policies while giving discounts to customers who pay their bills on time.

Credit checks would begin Nov. 2 for new policies and Jan. 1, 2018 for renewals. People’s Trust is the sixth largest insurer in South Florida, with 56,936 policies in Broward, Palm Beach and MaimiDade counties and 139,712 statewide at the end of March, according to state records.

The company is introducing credit-based insurance scoring — the use of credit histories to predict how often a policyholder will file claims — “to better understand and assess our risk as well as to develop more appropriate pricing for our customers based on that risk,” according to a statement in its filing.

The amount of the surcharges or discounts will vary according to what the credit checks reveal, the filing states.

Insurers that support using credit scores to set prices say homeowners with poor credit are less likely to keep their homes maintained and as a result are more likely to file claims.

But not everyone buys that reasoning. Three states — California, Maryland and Massachusetts — prohibit the use of credit scores to price insurance.

Jay Neal, president and CEO of the Florida Association for Insurance Reform, a Fort Lauderdalebased insurance watchdog group, said he dislikes tying insurance pricing to credit scores because it disproportionately affects minorities and people with low incomes, who tend to have lower credit scores.

“Having said that, there are plenty of companies selling insurance in Florida that are not using credit scoring that consumers can turn to,” he said.

Other Florida-based property insurers that use credit histories as a pricing factor include market leader Universal Property & Casualty, State Farm, Heritage Property & Casualty, United Property & Casualty, and Sawgrass Mutual.

Companies that do not check credit include state-run Citizens Property Insurance Corp., Florida Peninsula, Security First, Homeowners Choice and Federated National, state filings show.

In Florida, however, insurers have been slow to embrace credit scoring in part because of opposition by former Insurance Commissioner Kevin McCarty, who retired in 2016.

Under McCarty, the Office of Insurance Regulation started requiring companies to prove they weren’t basing credit-check requests on race, color, religion, marital status, age, gender, income, national origin or place of residence. They also had to document how credit would be used to set prices, and attest that decisions would not be based on adverse credit scores resulting from unpaid medical bills.

Florida law also prevents use of credit scoring in setting prices for hurricane coverage, the most expensive portion of homeowner insurance here. But credit scores can be applied to the “All Other Perils” portion — which covers losses from vandalism, water, hail, fire, lightning, personal liability, theft, and other causes.

Amy Rosen, chief marketing officer at People’s Trust, said the company would be “careless” not to use behavioral predictors of risk in setting premiums.

In an email, Rosen said she could cite “fraudulent or overstated water claims due to the outrageous Assignment of Benefits issue that plagues our state” as the reason the company is turning to credit checks.

“But the truth is, even without these issues it’s foolish for an insurance carrier to not use all tools available to them,” she wrote. “We owe it to our policyholders to be as responsible in our risk assessment and pricing as possible, in any situation.”