Snowball Effect of Credit Freezes on Underwriting, Pricing

With over 143 million Americans impacted by the Equifax data breach, a record number of consumers are freezing their credit. The move, which restricts access to a credit report, could have a trickle-down effect on a consumer’s insurance rate. Be sure to educate your customers on the potential impacts and workarounds.

The National Association of Insurance Commissioners (NAIC) recently issued a consumer alert on the topic, which explained:

Some states allow insurers to access your credit information to underwrite or rate. In other cases, a policyholder may want to consider temporarily lifting a credit freeze. If a freeze renders a consumer’s credit report inaccessible, the insurer may rate the consumer as if they have neutral credit information or exclude the use of credit information as a factor. This means that a consumer who is up for renewal and has excellent credit may experience an increase in their rate. If you receive an adverse action notice based on the freeze, you should contact your agent or insurer.

The alert goes on to share that, while there often are fees associated with temporarily lifting a credit freeze to conduct specific business (such as buying insurance), there is no charge for consumers impacted by the 2017 Equifax data breach.

Access the NAIC consumer alert