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Many consumers recognize their homeowner and auto insurance premiums are based on risk. If you've totaled ten cars in the past ten years, you can expect to pay higher auto insurance rates. But insurance companies are using another tool to set rates and, in some cases, deny coverage: your credit rating. Attorney General Mike Hatch wants the practice stopped and is proposing legislation prohibiting insurance companies from using credit information.

Sue Simons and her husband have driven for more than 20 years without an accident or speeding ticket. A few months ago, she filed bankruptcy after a string of setbacks in three months: major surgery; the death of her mother and a house fire. Despite her good driving record, however, Allstate cancelled her auto insurance. Her agent said it was because of her credit rating.

Simons: Give us a break. When I first started driving, they looked at your driving record. That's what your insurance was based on; nothing else. I've never been an at-risk driver. In fact, I drive for the Salvation Army. I can drive a Hennepin County car. You've got to have a good driving record to do that.

Minnesota Attorney General Mike Hatch wants insurance companies to stop that practice because he says there's no correlation between credit ratings and risk.

Hatch: They ought not be charging on the basis of how much they can gouge people simply because they're not in as good a financial shape as the rest of us. They ought to be doing it on the basis of propensity to have accidents; that's what underwriting is all about. What they're doing is going over the line. They're putting that ladle in the trough and they're hurting the small guy.

Parsons: If you take good care of your credit, you're probably going to take good care of your car and your home.

Parsons: The reason you use them as opposed to going through all the underwriting criteria that you normally do: how many accidents have you had, how long have you been driving and all those sorts of things. They use a credit history for a surrogate for that and it's automated. You get the credit history from the credit bureau and it goes into an economic model and it comes out with a prediction on whether this is a good risk or not a good risk.

Riley: It's hard to tell a consumer after they've applied that their credit report isn't satisfactory. Some of the things they look at brings your score up or down. Whether you have too many credit cards and you may have too much credit line even though your credit line isn't extended; they take that into consideration.

Holm: All laws are open to interpretation and the insurance companies are providing the interpretation for their agents. Agents aren't likely to go against the interpretation of the insurance company. This is causing insurance agents to be in a very bad situation with their clients. Clients view this as an invasion of privacy.

Elizabeth Stawicki covers legal issues for Minnesota Public Radio. You can reach her at estawicki@mpr.org.