Insurers Fined for Raising Premiums Following Credit Freezes

In the wake of the multiple recent data breaches, consumers are increasingly advised to use a credit freeze to mitigate their risk of identity theft.  Credit freezes reduce the risk  identity thieves your identity is used to open fraudulent accounts by prohibiting the major credit reporting agencies from responding to inquiries, and effectively stopping anyone from obtaining credit in your name.

But many consumers are paying for the credit freeze in surprising ways.  Washington’s Insurance Commissioner recently fined GEICO for raising premiums on insureds who froze their credit.

Insurers are generally permitted to consider consumers’ credit scores in setting premiums.  Accordingly, raising premiums on consumers who effectively have no credit score because of a credit freeze is technically legal.

However, insurers must notify policyholders whose premiums are increasing due to a credit freeze.  Notices must explain the insured’s premiums are increasing and provide a reason for the increase.

In GEICO’s case, the Insurance Commissioner found GEICO failed to properly notify affected insureds.  While GEICO notified insureds it was raising their premiums, it failed to detail that the basis for the premium hike was the insured’s credit freeze.

In short, if your premiums recently increased, it’s worth contacting your insurer and insisting on an explanation.