By definition, underwriting is a means of discriminating between preferred and non-preferred risks. Every company and every policy discriminates in some way. As for credit scoring, it has proven to be a valid predictor of losses. The real question is whether credit scoring is bad discrimination – illegal racial discrimination. The plaintiff’s say it is because they believe that more minorities are negatively affected by it. The plaintiff’s must presume that more minorities have bad credit. Allstate says it isn’t racial discrimination because the system does not consider, or even know the race of the applicant. As an American, I don’t believe disparate impact should be able to prove illegal discrimination. As an agent, I’d be happy to do away with all credit scoring headaches.
I have argued this issue for years with the former Allstate agent pushing this lawsuit. Ever since we started using credit there has been a niticeable decrease in our loss ratio. Unless we are a government agency we are in business to make a profit. I live in a town which is nearly 50% Hispanic. If their credit is so bad,just because of their race,why do I have so many Hispanic clients in our preferred companies? Credit scoring is not perfect but it is an improvement over antiquated underwriting systems
If credit scoring were fair, it would be accurate as well. Unfortunately, it has proven to be neither. In the state of Texas where I operate some agencies, we have spent more time and money on this issue than any single thing since 1998.
How can it not be accurate, you ask? Simple. I have clients who are gainfully employed business owners with much more money in the bank than most and they have “No Score”. I have clients whose 18 year old son or daughter who has NEVER EARNED AN INCOME OR PAID A BILL who has much better credit score than THEY do. I have clients who qualify for the best tiers in one company and are bounced out of another.
The criminal thing is that independent agencies like mine have been dealing with front office credit scoring since 1998 and have been doing our best to explain that to a client…which is next to impossible. The major 4 insurers in our state, who have claimed in the past that they do not use this system, have been using it for 25 years…..who do you think came up with the acturial data to say it works. If it works for their bottom line, great. But I am curious as to how one can explain it to be fair…since it is not accurate.
Lets see your auto rate changes based on your age, discrimination? Your auto rate changes based on your Zip code, discrimination? Your auto rate is based on your driving record, discrimination? Your homeowners rate is different for frame vs masonry discrimination? Its very hard to get homeowners coverage if you don’t keep your home in good shape, discrimination? ITS ALL DISCRIMINATION, to have you pay YOUR rate rather than the rate of a 16 year old driver who dosn’t have a clue who lives in an area with high losses, and has a horible driving record. Credit Scoring is to try to better price your policy based on you. The vast majority of clients would see a rate increase if it went away because you would once again help pay for those who are causing most of the claims. This from an agent who would love to see it go away because it would make our lives much easer, trust me it is a real pain for us to administer!
i have never been a fan of credit scoring to obtain insurance coverage. it is not like purchasing a house. why should your credit score be relevent in obtaining insurance? strike one up for the consumer. shame on you Allstate, don’t be greedy.
Credit scoring can be a valuable tool in determining risk. However, the 3 companies that provide credit scores can’t even agree on an individuals score. If the system is flawed to this degree there can be no doubt that the system is unfair. Credit should not be used to determine insurance rates until the unregulated business of scoring credit can be made reliable.
Credit Reporting itself in inherently racist. Credit reporting agencies (CRAs)sell consumer’s personal financial information to banks, credit card issuers, insurance companie, etc. They do so by catagorizing. Most poor and lower middle class (disproportionately minorities) fall into what is known as “subprime.” Meaning that they have had some sort of financial difficulties or have little in the way of financial histories. This leads to massive credit card offers by subrime lenders such as Providian (although ordered out of the subprime market by the comptroller) or Capital One, which charge upwards of 30% interest to those consumers. Needless to say, eventually many find they can’t keep up with the payments and default. Now guess what? This puts them right back into a subprime pool that they can never swim out of. Enter the insurance industry. About 20 years ago the Inurance Industry lobbied hard in every state to get mandatory insurance laws…and they won. Now every consumer who needs to drive to work to support a family needs to have insurance or they could be fined/arrested.Our states have forced us to deal with them or, in most cases, not work. The people who need to do the most driving are not the wealthy or upper upper middle class. They are the Subprime group. The working stiffs who are most liable to get into financial trouble because of a job loss, turn in the economy, tragedy, etc. What the insurance industry won’t tell people is that African American drivers file a disproportionate ammount of claims compared to white drivers. This is not due to driving skills but more likely to the areas which minorities must live as opposed to wealthy whites. Insurers would rather not insure many African Americans (or other minorities for that matter) but cannot refuse on the basis of race because, of course, it is against the law. So they use credit reports instead, knowing that the highest percentage of African Americans have blemished credit files. This way, as they see it, they can discriminate and stay with in the law. African Americans pose higher insurance risks because, as lower income americans, they do not own vehicles with advanced safety equipment…thus they file more personal injury claims. They live in poorer neighborhoods…thus they are more prone to theft and vandalism. And, as mentioned, they must drive more to support themselves and their families than their wealthy counterparts. There has never been a study that conclusively linked poor credit and bad driving (not even by the Isurance industry). Theres no way you could based on what I’ve just said. The poor are the most credit challenged and do the most driving and live in the worst neighborhoods. Funny thing is, the Fair Issac company, the ones who supply the data for insurance scoring…don’t even take driving records into consideration. I hope the case against Allstate opens some eyes to this blatant ripoff of consumers by the lowly insurance industry. Oh by the way, you know why the insurance companies have lost so much money in the past? Not because of claims but because they gambled on the stock market and lost. Now they’d like to pass the savings on to you.
It isn’t fair to someone who has had the same Insurance Co. for over 30 yrs. One time in 28 yrs. we have problems paying our bills, file bankruptcy and can’t find a job. The put you in a category, no matter how many years you struggled to pay all your bills on time and do exactly what you were supposed to do and contact creditors who gave you a hard time. I really feel everything you should be taken in account and not just one VERY BAD part of your life. We now are back on our feet and got there all by ourselves, {new older house and car} but after all these yrs. of having ALLSTATE when we moved to another state they ran a credit check and raised our rates and this new homeowners policy was ridiculous. We went somewhere else. {excellent driving record} Good Luck to them and their DISCRIMINATION POLICY.
It isn’t fair to someone who has had the same Insurance Co. for over 30 yrs. One time in 28 yrs. we have problems paying our bills, file bankruptcy and can’t find a job. The put you in a category, no matter how many years you struggled to pay all your bills on time and do exactly what you were supposed to do and contact creditors who gave you a hard time. I really feel everything you should be taken in account and not just one VERY BAD part of your life. We now are back on our feet and got there all by ourselves, {new, older house and car} but after all these yrs. of having ALLSTATE when we moved to another state they ran a credit check and raised our rates and this new homeowners policy was ridiculous. We went somewhere else. {excellent driving record} Good Luck to them and their DISCRIMINATION POLICY.
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Poor credit scores are NOT a good predicter of more claims! The theory fails to take into account morals and ethics.
By definition, underwriting is a means of discriminating between preferred and non-preferred risks. Every company and every policy discriminates in some way. As for credit scoring, it has proven to be a valid predictor of losses. The real question is whether credit scoring is bad discrimination – illegal racial discrimination. The plaintiff’s say it is because they believe that more minorities are negatively affected by it. The plaintiff’s must presume that more minorities have bad credit. Allstate says it isn’t racial discrimination because the system does not consider, or even know the race of the applicant. As an American, I don’t believe disparate impact should be able to prove illegal discrimination. As an agent, I’d be happy to do away with all credit scoring headaches.
I have argued this issue for years with the former Allstate agent pushing this lawsuit. Ever since we started using credit there has been a niticeable decrease in our loss ratio. Unless we are a government agency we are in business to make a profit. I live in a town which is nearly 50% Hispanic. If their credit is so bad,just because of their race,why do I have so many Hispanic clients in our preferred companies? Credit scoring is not perfect but it is an improvement over antiquated underwriting systems
If credit scoring were fair, it would be accurate as well. Unfortunately, it has proven to be neither. In the state of Texas where I operate some agencies, we have spent more time and money on this issue than any single thing since 1998.
How can it not be accurate, you ask? Simple. I have clients who are gainfully employed business owners with much more money in the bank than most and they have “No Score”. I have clients whose 18 year old son or daughter who has NEVER EARNED AN INCOME OR PAID A BILL who has much better credit score than THEY do. I have clients who qualify for the best tiers in one company and are bounced out of another.
The criminal thing is that independent agencies like mine have been dealing with front office credit scoring since 1998 and have been doing our best to explain that to a client…which is next to impossible. The major 4 insurers in our state, who have claimed in the past that they do not use this system, have been using it for 25 years…..who do you think came up with the acturial data to say it works. If it works for their bottom line, great. But I am curious as to how one can explain it to be fair…since it is not accurate.
Lets see your auto rate changes based on your age, discrimination? Your auto rate changes based on your Zip code, discrimination? Your auto rate is based on your driving record, discrimination? Your homeowners rate is different for frame vs masonry discrimination? Its very hard to get homeowners coverage if you don’t keep your home in good shape, discrimination? ITS ALL DISCRIMINATION, to have you pay YOUR rate rather than the rate of a 16 year old driver who dosn’t have a clue who lives in an area with high losses, and has a horible driving record. Credit Scoring is to try to better price your policy based on you. The vast majority of clients would see a rate increase if it went away because you would once again help pay for those who are causing most of the claims. This from an agent who would love to see it go away because it would make our lives much easer, trust me it is a real pain for us to administer!
i have never been a fan of credit scoring to obtain insurance coverage. it is not like purchasing a house. why should your credit score be relevent in obtaining insurance? strike one up for the consumer. shame on you Allstate, don’t be greedy.
Credit scoring can be a valuable tool in determining risk. However, the 3 companies that provide credit scores can’t even agree on an individuals score. If the system is flawed to this degree there can be no doubt that the system is unfair. Credit should not be used to determine insurance rates until the unregulated business of scoring credit can be made reliable.
Credit Reporting itself in inherently racist. Credit reporting agencies (CRAs)sell consumer’s personal financial information to banks, credit card issuers, insurance companie, etc. They do so by catagorizing. Most poor and lower middle class (disproportionately minorities) fall into what is known as “subprime.” Meaning that they have had some sort of financial difficulties or have little in the way of financial histories. This leads to massive credit card offers by subrime lenders such as Providian (although ordered out of the subprime market by the comptroller) or Capital One, which charge upwards of 30% interest to those consumers. Needless to say, eventually many find they can’t keep up with the payments and default. Now guess what? This puts them right back into a subprime pool that they can never swim out of. Enter the insurance industry. About 20 years ago the Inurance Industry lobbied hard in every state to get mandatory insurance laws…and they won. Now every consumer who needs to drive to work to support a family needs to have insurance or they could be fined/arrested.Our states have forced us to deal with them or, in most cases, not work. The people who need to do the most driving are not the wealthy or upper upper middle class. They are the Subprime group. The working stiffs who are most liable to get into financial trouble because of a job loss, turn in the economy, tragedy, etc. What the insurance industry won’t tell people is that African American drivers file a disproportionate ammount of claims compared to white drivers. This is not due to driving skills but more likely to the areas which minorities must live as opposed to wealthy whites. Insurers would rather not insure many African Americans (or other minorities for that matter) but cannot refuse on the basis of race because, of course, it is against the law. So they use credit reports instead, knowing that the highest percentage of African Americans have blemished credit files. This way, as they see it, they can discriminate and stay with in the law. African Americans pose higher insurance risks because, as lower income americans, they do not own vehicles with advanced safety equipment…thus they file more personal injury claims. They live in poorer neighborhoods…thus they are more prone to theft and vandalism. And, as mentioned, they must drive more to support themselves and their families than their wealthy counterparts. There has never been a study that conclusively linked poor credit and bad driving (not even by the Isurance industry). Theres no way you could based on what I’ve just said. The poor are the most credit challenged and do the most driving and live in the worst neighborhoods. Funny thing is, the Fair Issac company, the ones who supply the data for insurance scoring…don’t even take driving records into consideration. I hope the case against Allstate opens some eyes to this blatant ripoff of consumers by the lowly insurance industry. Oh by the way, you know why the insurance companies have lost so much money in the past? Not because of claims but because they gambled on the stock market and lost. Now they’d like to pass the savings on to you.
It isn’t fair to someone who has had the same Insurance Co. for over 30 yrs. One time in 28 yrs. we have problems paying our bills, file bankruptcy and can’t find a job. The put you in a category, no matter how many years you struggled to pay all your bills on time and do exactly what you were supposed to do and contact creditors who gave you a hard time. I really feel everything you should be taken in account and not just one VERY BAD part of your life. We now are back on our feet and got there all by ourselves, {new older house and car} but after all these yrs. of having ALLSTATE when we moved to another state they ran a credit check and raised our rates and this new homeowners policy was ridiculous. We went somewhere else. {excellent driving record} Good Luck to them and their DISCRIMINATION POLICY.
It isn’t fair to someone who has had the same Insurance Co. for over 30 yrs. One time in 28 yrs. we have problems paying our bills, file bankruptcy and can’t find a job. The put you in a category, no matter how many years you struggled to pay all your bills on time and do exactly what you were supposed to do and contact creditors who gave you a hard time. I really feel everything you should be taken in account and not just one VERY BAD part of your life. We now are back on our feet and got there all by ourselves, {new, older house and car} but after all these yrs. of having ALLSTATE when we moved to another state they ran a credit check and raised our rates and this new homeowners policy was ridiculous. We went somewhere else. {excellent driving record} Good Luck to them and their DISCRIMINATION POLICY.