How about the \”credit score\” (Best\’s Rating) of the carriers?? When their \”score\” drops below a certain level the guarantee fund get\’s to come in and handle their finances. How much media attention does that get???
Sadly, politicians have caved in to the needs of irresponsible individuals. Notice how everyone with bad credit is never their fault. Yet, less than 5% of people with bad credit are a result of a medical issues.
Some people want to spend more money than they make. These very same people wan\’t the rich to pay their tax share. These very same people have a higher percentage of insurance claims. There very same people are flipping off society.
As long as the politicians let them get away with it, they will continue to raise their middle finger at society and have me and work late while they slouch on their couch!
If \”credit scoring\” is reliable, why isn\’t it used for all insurance? Maybe it\’s because the junk science \”backwards research\” was done on home and auto claims only? Or maybe the research was done by a \”pay us and we\’ll give you whatever results you want\” outfit like J D Fabricator & Assoc. Imagine the premium windfall if carriers start using \”insurance credit scoring\” for life, disability, group health, atv, snowmobile, as well as all commercial lines (score every corporate officer, partner, etc). Don\’t think they won\’t? Guess again America and bend over. My suggestion is to kill this ugly little monster before it grows folks. The king has no clothes folks!
If credit scoring is such a \”good predictor\” of loss, why hasn\’t anyone ever seen valid, reproducable studies to prove credit scoring – where are the facts?
Oh, and by the way, who says credit scoring is limited to auto and homeowners?
Well it sounds to me like underwriting is grasping at straws trying to find a way to suck more money out of the consumer.
Everybody needs to make a living but AGAIN most companies have made the highest profits in 10-15 years! Why don\’t they take and reduce the bonus the CEO,CFO takes put this back into the company and or credit good drivers and investors?
Third 1/4 results are coming out and the preliminary shows a pretty damn good return ratio.
Why does there have to be any profiling at all. The bad driver is a bad driver they should be the ones that pay for the risk. I guess I\’m just a hopeless old timer thinking that MAYBE the execs don\’t need so much in bonus and stock options and companies could survive alone on people with high end knowledge of investing and cost control. How much more hedging has to take place before people in all aspects of insurance say enough is enough.
This little tight knit group reminds me of the Skull and Bones story!
There\’s not enough data to use it for other types. Life insurance is almost entirely based on mortality and interest rates, plus, you only make 1 claim on a life insurance policy.
Auto/Home has the probability of multiple claims with multiple payouts.
I work for an insurer and credit scoring is pure garbage. The reason is the score itself. These scores are EASILY manipulated. My score was about 665 last year and I needed 685 for the best rate on my house so I manipulated it and in 1 month had a score of 715. (I can tell you how to manipulate yours if you\’re looking for a loan by the way.) My score has been as low as 550 and as high as 807, depending on what I needed it to be. The score itself is FAR too subjective to ever be used as a good indicator of anything. If every credit reporting company had hard and fast rules about what a score is comprised of and how it\’s determined, and every credit reporting company insured and was held accountable for 100% accuracy in every report, and if every insurer weighted those scores in exactly the same fashion in terms of underwiting then yes, the scores would, in fact, be a statistically good predictor of future claims experience. This is the difference between mathematics and real life. Mathematics is rigid, fixed and absolutely true…real life use of those mathematical concepts is NOT.
Hal, your story was genius – I loved it :-)
I didn\’t think I would be chiming back in but I have a little more to get off my chest.
First, let\’s remember the article we\’ve read indicates that underwriting will need new tools IF credit scoring goes away. My comment was meant to indicate that underwriting tools still exist AND suggest that underwriters today may rely too heavily on a credit score……which was not meant to be the only selection tool.
It has also been stated (and accurately so, I believe) that CS works in a world of large numbers and based on a book of business can be predictive of profit/loss results. I\’m just not sure, for a variety of reasons, that it is a consistently good tool for individual risk underwriting.
LLCJ warns us not to rely on anecdotal events and that a thorough reading and understanding of the actuarial \”arts\” and the statistical tools of correlation will be needed to evaluate the use of credit scoring. I agree that anecdotal situations bring little to the discussion.
However, in my experience, which includes working for two major, national stock companies and being a Regional Underwriting Manager in two different geographic parts of the US (and spending 34yrs in the industry)…..my departments were able to generate an underwriting profit (in both auto and HO)without CS even being a glimmer in the CEO\’s eye. But then we used all the tools avialable and our own experience/intelligence.
Sadly, for expense reasons, the personal lines underwriting process at many companies has been reduced to reliance on the computer edits (and CS scores) that dictate a good or bad risk. I\’m not saying the use of automation is bad but rather it has led to a reduction in the number of underwriters and the skills they may have acquired over time.
Give me an accurately completed app, a good agent and a good analysis of my book\’s claim experience and I can produce a profit.
By the way, I don\’t consider there to be an actuarial \’science\’. I learned early on during rate analyses with HO actuaries that they use credibility factors (fudge factors for the uneducated like me) to beef up their statistical universe upon which decisions are made. High level guessing if you ask me.
Rick hit it on the head, ins co\’s moved to cs scoring so they could computer underwrite, remove the person from the process. Has anyone ever come up with a figure on how many $ are saved by having fewer real people underwrite the old fashion way ?
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How about the \”credit score\” (Best\’s Rating) of the carriers?? When their \”score\” drops below a certain level the guarantee fund get\’s to come in and handle their finances. How much media attention does that get???
Sadly, politicians have caved in to the needs of irresponsible individuals. Notice how everyone with bad credit is never their fault. Yet, less than 5% of people with bad credit are a result of a medical issues.
Some people want to spend more money than they make. These very same people wan\’t the rich to pay their tax share. These very same people have a higher percentage of insurance claims. There very same people are flipping off society.
As long as the politicians let them get away with it, they will continue to raise their middle finger at society and have me and work late while they slouch on their couch!
If \”credit scoring\” is reliable, why isn\’t it used for all insurance? Maybe it\’s because the junk science \”backwards research\” was done on home and auto claims only? Or maybe the research was done by a \”pay us and we\’ll give you whatever results you want\” outfit like J D Fabricator & Assoc. Imagine the premium windfall if carriers start using \”insurance credit scoring\” for life, disability, group health, atv, snowmobile, as well as all commercial lines (score every corporate officer, partner, etc). Don\’t think they won\’t? Guess again America and bend over. My suggestion is to kill this ugly little monster before it grows folks. The king has no clothes folks!
Wonderful,
Now we know that credit scoring is a hot topic.
If credit scoring is such a \”good predictor\” of loss, why hasn\’t anyone ever seen valid, reproducable studies to prove credit scoring – where are the facts?
Oh, and by the way, who says credit scoring is limited to auto and homeowners?
No wonder the public hates insurance.
Well it sounds to me like underwriting is grasping at straws trying to find a way to suck more money out of the consumer.
Everybody needs to make a living but AGAIN most companies have made the highest profits in 10-15 years! Why don\’t they take and reduce the bonus the CEO,CFO takes put this back into the company and or credit good drivers and investors?
Third 1/4 results are coming out and the preliminary shows a pretty damn good return ratio.
Why does there have to be any profiling at all. The bad driver is a bad driver they should be the ones that pay for the risk. I guess I\’m just a hopeless old timer thinking that MAYBE the execs don\’t need so much in bonus and stock options and companies could survive alone on people with high end knowledge of investing and cost control. How much more hedging has to take place before people in all aspects of insurance say enough is enough.
This little tight knit group reminds me of the Skull and Bones story!
Why not use it for all insurance?
There\’s not enough data to use it for other types. Life insurance is almost entirely based on mortality and interest rates, plus, you only make 1 claim on a life insurance policy.
Auto/Home has the probability of multiple claims with multiple payouts.
I work for an insurer and credit scoring is pure garbage. The reason is the score itself. These scores are EASILY manipulated. My score was about 665 last year and I needed 685 for the best rate on my house so I manipulated it and in 1 month had a score of 715. (I can tell you how to manipulate yours if you\’re looking for a loan by the way.) My score has been as low as 550 and as high as 807, depending on what I needed it to be. The score itself is FAR too subjective to ever be used as a good indicator of anything. If every credit reporting company had hard and fast rules about what a score is comprised of and how it\’s determined, and every credit reporting company insured and was held accountable for 100% accuracy in every report, and if every insurer weighted those scores in exactly the same fashion in terms of underwiting then yes, the scores would, in fact, be a statistically good predictor of future claims experience. This is the difference between mathematics and real life. Mathematics is rigid, fixed and absolutely true…real life use of those mathematical concepts is NOT.
Hal, your story was genius – I loved it :-)
I didn\’t think I would be chiming back in but I have a little more to get off my chest.
First, let\’s remember the article we\’ve read indicates that underwriting will need new tools IF credit scoring goes away. My comment was meant to indicate that underwriting tools still exist AND suggest that underwriters today may rely too heavily on a credit score……which was not meant to be the only selection tool.
It has also been stated (and accurately so, I believe) that CS works in a world of large numbers and based on a book of business can be predictive of profit/loss results. I\’m just not sure, for a variety of reasons, that it is a consistently good tool for individual risk underwriting.
LLCJ warns us not to rely on anecdotal events and that a thorough reading and understanding of the actuarial \”arts\” and the statistical tools of correlation will be needed to evaluate the use of credit scoring. I agree that anecdotal situations bring little to the discussion.
However, in my experience, which includes working for two major, national stock companies and being a Regional Underwriting Manager in two different geographic parts of the US (and spending 34yrs in the industry)…..my departments were able to generate an underwriting profit (in both auto and HO)without CS even being a glimmer in the CEO\’s eye. But then we used all the tools avialable and our own experience/intelligence.
Sadly, for expense reasons, the personal lines underwriting process at many companies has been reduced to reliance on the computer edits (and CS scores) that dictate a good or bad risk. I\’m not saying the use of automation is bad but rather it has led to a reduction in the number of underwriters and the skills they may have acquired over time.
Give me an accurately completed app, a good agent and a good analysis of my book\’s claim experience and I can produce a profit.
By the way, I don\’t consider there to be an actuarial \’science\’. I learned early on during rate analyses with HO actuaries that they use credibility factors (fudge factors for the uneducated like me) to beef up their statistical universe upon which decisions are made. High level guessing if you ask me.
Rick hit it on the head, ins co\’s moved to cs scoring so they could computer underwrite, remove the person from the process. Has anyone ever come up with a figure on how many $ are saved by having fewer real people underwrite the old fashion way ?
Maybe just maybe; underwriters will need to truly assess risks based on the actual risk exposures. Now that would be a real innovation.