I was asked what I thought about insurance companies using credit scores to determine how to price, and sometimes whether to sell, insurance to different customers.  Insurance credit scoring is prohibited in California, but is used quite liberally throughout the country with a few exceptions.

My first response to that question is usually something to the effect of:

Whether or not you pay your Visa bill on time every month has
nothing to do with whether or not a windstorm is going to blow shingles
off your roof.

Here is a more detailed commentary, from a news release we issued several years ago when California lawmakers were trying to bring credit scoring here.

Consumer groups, privacy rights organizations and low-income
advocates oppose the use of credit scoring in the sale of insurance policies because there is no meaningful connection
between a person’s credit history and the likelihood that they
will experience a problem with their home or cause a car accident. Also, the groups argue, credit
scores are rife with errors and are frequently damaged by large-scale
identity theft. Government studies conducted in Texas and
Missouri found unequivocally that the use of credit scores to set
insurance rates disproportionately affects low-income and minority
consumers.

Rules for setting credit scores vary from company to company, and
the rationales are often absurd, notes FTCR. For example: A person with
exactly four credit cards will have a dramatically better rating than
someone with only one credit card, according to one credit scoring
scheme used in Virginia. (It’s even better to have 10 or more cards
than to have zero or one.)

ChoicePoint dings homeowners for having credit accounts with auto
parts stores. According to ChoicePoint: "Insurance industry research
shows that consumers who maintain open accounts with vehicle related
retail outlets have more insurance losses."

ChoicePoint also lowers insurance scores for homeowners who have sales finance accounts with a balance.

One company’s scoring system considers a homeowner a worse risk if
they’ve had 3 credit inquiries (from opening new accounts) in two years
than if they’ve had a bankruptcy, foreclosure and legal judgment
against them.

Credit Scoring Process Inherently Unfair
A summary of a 2004 study by the Missouri Department of Insurance
reveals how credit scores are inherently unfair, particularly to
members of disadvantaged communities:

1. The insurance credit-scoring system produces significantly worse scores for residents of high-minority ZIP Codes.
The average credit score rank in "all minority" areas stood at 18.4 (of
a possible 100) compared to 57.3 in "no minority" neighborhoods — a
gap of 38.9 points.

2. The insurance credit-scoring system produces significantly worse
scores for residents of low-income ZIP Codes. The gap in average credit
scores between communities with $10,953 and $25,924 in per capita
income (representing the poorest and wealthiest 5 percent of
communities) was 12.8 percentiles.

3. The relationship between minority concentration in a ZIP Code and
credit scores remained after eliminating a broad array of socioeconomic
variables, such as income, educational attainment, marital status and
unemployment rates, as possible causes. Indeed, minority concentration
proved to be the single most reliable predictor of credit scores.

4. Minority and low-income individuals were significantly more
likely to have worse credit scores than wealthier individuals and
non-minorities. The average gap between minorities and non-minorities
with poor scores was 28.9 percentage points. The gap between
individuals whose family income was below the statewide median versus
those with family incomes above the median was 29.2 percentage points.