INSURANCE COSTS MAY RISE AFTER PLACING SECURITY FREEZE
In the wake of recent data breaches, some customers report increases in yearly insurance costs after placing a security freeze on their credit reports.
Augusta, ME. October 8, 2015. An identity theft assistance company based in Maine is warning insurance customers across the U.S. who have recently placed a security freeze on their credit reports to carefully monitor the cost of their policies.
The company, Maine Identity Services, LLC, which provides assistance to data breach and identity theft victims and to police departments, has recently learned that insurance companies may be incorrectly increasing rates for customers who have placed a security freeze on their credit reports.
“We have become aware that some insurance companies are mistakenly using a customer’s frozen credit history as a negative factor when calculating the costs of the customer’s policy. This means that the rate charged for the insurance may be increased,” said Jane Carpenter, founder of Maine Identity Services, LLC. In one example, a customer saw their automobile insurance increase by more than $150.
“The fact that an individual has placed a security freeze on his or her credit report should be treated as neutral – and not negative – credit information by the insurance company and should not cause the cost of the policy to increase.”
Insurance companies in all but three states (Hawaii, California and Massachusetts) use the customer’s credit information as one of several factors in determining the annual cost of the insurance policy. Called “credit-based insurance,” the credit score is one of the factors used in setting insurance costs.
In addition, credit laws provide that an individual’s credit information is made available to companies that have a current account or relationship with the individual. However, in some instances an insurance company or a third party acting on its behalf may incorrectly be denied access to the individual’s credit file because of a security freeze.
Maine Identity Services also warns anyone who was the victim of a data breach and who is receiving credit monitoring services to carefully watch the cost of their insurance policies. “It is unclear at this point how credit monitoring -as a third party- works with the individual and the credit bureau to process an inquiry for insurance rates,” Carpenter advised.
As an example, millions of Americans were victims of the 2015 Anthem data breach and have been offered credit monitoring services. Overall, the Identity Theft Resource Center (ITRC) reports that there have been 563 data breaches so far this year.
Maine recently became one of several states to amend its security freeze law so that residents can place a freeze at no charge. “The fact that a security freeze – which provides excellent protection for data breach victims – could be creating higher insurance costs for the individual is disturbing. We wonder how many victims across the U.S. have seen increases in their insurance rates because of this and have not realized that the reason behind the increase was the security freeze or credit monitoring.”
Credit laws require that an individual be informed by a creditor if there is an adverse action as a result of their credit information. It is unclear at this time if all insurance companies provide such letters to their customers if a security freeze is involved. Many customers may receive a notification and not realize that they should question the reason for the increase in the cost of their policy.
Any insurance customer who has seen an increase in their insurance costs after filing a security freeze or receiving credit monitoring should contact their insurance company to ask why their rate has increased. If they are told it is as a result of insufficient or no credit information, they should file a complaint with their state bureau of insurance.
Maine Identity Services, LLC provides assistance to data breach and identity theft victims and support for police organizations across the U.S. It publishes the “Identity Theft Help Kit©,” the “Data Breach Repair Kit©” and the “Police Guide To Identity Theft©”, which provide assistance for victims and police and have been accepted by the U.S. Department of Homeland Security as authorized equipment under the Law Enforcement Terrorism Prevention Program (LETPP).