Credit targets

By Will Richardson

and Miki Gudermuth

Mike Smythe, vice president and general manager at KFVS12 television, recently blasted insurance companies for their inequitable use of credit ratings as criteria for determining insurance premiums. As advocates for the disabled, we agree and would like to offer the following.

The sick, disabled and older adult citizens of Missouri have faced exploitation and discrimination at the hands of profiteers for years. But recent policy changes in the insurance industry began targeting these groups with an unthinkable shakedown, all done under the noses or possibly with the approval of lawmakers whose responsibility it is to protect our most vulnerable citizens.

American Family Insurance recently sent out letters to homeowners notifying them that credit reports are being used to determine homeowner insurance rates rather than the homeowners' claim history. Farmers Insurance and others use a person's credit rating to determine automobile insurance rates, disregarding the safe driving records of many motorists.

On the surface, this might not seem like such a big thing. Indeed, Farmers goes out of its way to claim that a person's credit rating is directly related to his risk as a driver. But is it really? Let's look at some causes of bad credit ratings and see what they have to do with driving.

According to a recent study at Harvard University, more than 50 percent of people filing for bankruptcy in our country have suffered a catastrophic medical emergency draining them of financial resources and damaging their credit rating. The number of medical bankruptcies increased 2,200 percent between 1981 and 2001 and is still climbing. Most people filing for bankruptcy due to illness are middle-class Americans.

Seventy-five percent of medical debtors had health insurance at the outset of the bankrupting illness. Most lost health insurance due to unemployment brought on either by their medical condition or downsizing. High medical bills contributed to 60 percent of medical bankruptcies, while drug costs contributed 48 percent.

Many families suffered greatly before finally being forced to file for medical bankruptcy. Twenty-two percent went without food at some point, 30 percent had utilities shut off, 61 percent went without needed medical attention and 50 percent failed to fill needed prescriptions.

According to the study, today's health insurance policies with high deductibles, co-pays and many exclusions offer little protection against catastrophic illness, and "unless you are Bill Gates, you are just one serious illness away from bankruptcy." Many victims of medical bankruptcy eventually seek help from programs such as Medicaid, which has already been dangerously restricted in Missouri due to actions by lawmakers in the past two years.

To add insult to illness, profiteers from the insurance companies are cashing in on the plight of sick people by using individual credit rating as an excuse to drain more money from them through higher homeowner and auto insurance. Older couples who find themselves with one spouse in a nursing home often lose their property and savings, leaving them with a bad credit rating and thus vulnerable to the same unfair rise in insurance premiums.

Sick, disabled and older adult citizens aren't the only potential victims of this outrage by the insurance companies. Many things unrelated to illness or poor financial habits could affect credit ratings. For example, if you go car shopping and your credit is checked several times without a purchase being made, your credit rating may be lowered.

And what about those of us, especially in the older adult community, who believed in Benjamin Franklin's philosophy of "neither a lender or borrower be"? Apparently this makes us bad drivers and risky homeowners in the eyes of the insurance industry, or at least it provides them with a convenient excuse to bilk us for higher premiums.

If that isn't enough, how many of you have had erroneous data appear on your credit report and had to fight the credit bureau to remove it?

A credit rating in the minds of most Americans is just that, and it should not be used by big business for any other purpose. Employers are using credit rating as a disqualifier in hiring, which is flagrant discrimination against the sick, disabled and older adult communities and those who simply choose to rely on their own resources.

Lawmakers should have never allowed big insurance companies or others to unfairly profit from the misfortunes or alternate lifestyles of decent Americans. The time is way over due for legislation returning credit ratings to their rightful place as measures of our borrowing capacity, and ratings should be protected from predators who would misuse them. Until sensible universal health care can be provided in our country, lawmakers must establish stiff regulations to protect our citizens from this despicable misuse of individual credit data by insurance companies and others.

Will Richardson is the director of outreach and education and Miki Gudermuth is the executive director of the SEMO Alliance for Disability Independence in Cape Girardeau.