Loophole in security freeze law exposes credit report to insurer

I have a security freeze in place with the three credit reporting agencies. No one should be able to access my credit report without me unlocking it first.

So I wasn't surprised when, about a month ago, I received an "important policyholder notice" from my insurer stating that they had received insufficient information on my "credit-based insurance bureau score," which they use to set policy renewal premiums. As a result, the letter went on, this lack of information may have affected the pricing of my home and auto policy, which had gone up substantially.

The "primary factors" affecting this were "insufficient information on oil company accounts, # of open credit union, s&l or mortgage accounts, # of no-closed accounts, ...sales finance accounts...department store accounts...personal finance accounts...." -- all stuff that would have been pulled from my credit report.

So I called the insurer's office of the president to ask whether in fact they needed my credit report and if so, why. I spoke with Mark. Yes, he explained, part of that insurance score was built by ChoicePoint using a credit report from Experian. I'd need to unfreeze my account so that this review could take place.

Had my security freeze spiked my insurance premiums? At first that seemed to be the case. But things got murky pretty fast.

Why did they need a credit report for a customer of more than a decade? Using analytics, the insurance companies have determined that certain attributes in a credit report can substantially predict claims activity. For example, people who don't have a credit account with a heating oil supplier tend to have higher claims than those who do. Who knew? So I reluctantly agreed to call him the next day, after I paid Experian the $10 fee to have them unlock my credit report.

How they got my report

Before I could do so, Mark was on the phone again, calling to tell me that the insurer had in fact obtained a copy of my credit report from Experian -- a turn of events I found alarming. Why would Experian allow access to a locked account without my permission? And if the insurer had in fact obtained the credit report, why did they send me the letter in the first place?

Mark made a few calls and sent me back this explanation from ChoicePoint's legal department:

The Consumer Credit Reporting Security Freeze law in NH [where I live] does not apply to the use of a consumer report by any person or entity for use in setting or adjusting an insurance rate or claim or underwriting for insurance purposes. For that reason, Experian provided the report to the insurance carriers in question. Refer to New Hampshire Revised Statutes Section 359-B:24(XVIII)(j).

This was troubling, to say the least. I'd been loopholed!

So then, why had I received the letter? Mark assured me that the "insufficient information" noted in the letter had no affect on my premium -- which had gone up by over $1,000.

I was dubious.

"I am uncertain why these codes are printed on the notice you received," he said. "It would seem they should be suppressed, since it appears they are generated directly to the notice from the data received from the the reporting agency and they have no premium effect."

But that wasn't the end of it.

Experian, Choicepoint deny everything

I called Experian to find out what was going on. After the usual automated attendant runaround, I looked up the corporate HQ number in Hoover's and used that to get through to someone who actually could help me. A check showed that my freeze was active and that no access to my credit report had been requested by anyone since November 2009, when I had unlocked it briefly to process a bank loan application.

I made a similar call to ChoicePoint, which suggested I visit its Consumer Center Web site, where I could submit a request for information if an insurer had pulled a report that "negatively impacted" me. Today a reply arrived by mail. It states:

"Our records do not reflect that we recently provided an Insurance Company with your report(s)."

The real reason my rates went up

I still don't know for sure what happened with my credit report, nor why the "important policyholder notice" was sent.

But I do know why my insurance premium went up. Somewhere along the line, someone had added full coverage for a 2004 Chevy S10 Blazer on my renewed policy, complete with Vehicle ID Number.

I don't own an S10.

My agent is removing it as I write this.

I just saved $1,164 on my car insurance. And I don't even use GEICO.

Note: On September 28th I received this explanation from LexisNexis clarifying insurance scores and credit scores:

A credit score is a reflection of an individual's credt rating and financlal performance.  An individual's credit report may conrtain no negative factor from the standpoint of decisions made with respect to the granting of credit, but at the same time could indicate a greater or lesser degree of risk that an insurance loss will occur.

An insurance score is a numerical value associated with an individual based on an evaluation of his or her credit report and is a predictor of the likelihood of a future insurance loss. Statistical correlations have been proven to exist between various characteristics contained in a credit report and the frequency of insurance losses.

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