No one is going to show you the data, rating algorithms and studies are proprietary. Even when actuaries file rate filings with the state, they don\’t file all the nitty-gritty.
MC:
You made Bob\’s point for him. We live in a \”keeping up with the joneses\” society. People want these things. People always want things they can\’t afford. However, it is responsibility that will restrain these purchases, and thereby reducing credit card debt.
Danny P:
Your argument that allowing credit scoring allows race based underwriting in the back door is in itself a racist argument, since you yourself are making some racial assumptions about income and race. This is even worse than saying underwriting by zip code is race-based.
I am not making racial assuptions, read my post more carefully please. I said \”What if\” in order to make an analogy.
You get analogies right? They are on the SAT. As far as your \”no one is going to show you the data\” argument is concerned, credit scores are compiled by credit agencies like Choicepoint, not insurance companies.
Also, the credit agencies are interlinked with the governement, thats how they legally controll all our personal info remember?
So the statistic im looking for should be public record, maybe its out there somewhere, maybe its hidden for a reason, imagine that.
Back in 2003 a company named EPIC Actuaries, LLC put together their study -\”The Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Insurance Loss Propensity\”. It\’s not exactly light reading. If you are a numbers person, you will love it, if you are not – your going to give yourself a headache. You can probably find this study by doing a simple google search.
I deduct by some of these responses, some of you have not seen this study or any other studies that have to do with this correlation. As a professional, I believe it is \”our duty\” as Agents/Brokers/Producers to fully understand this correlation so that we may pass the knowledge onto our clients – the insured. They ARE our assets and we need to look after them in that light. The only way to win the game is to know how it\’s played. Happy Holidays, enjoy the reading.
Wow, looks like Commissioner Denn has touched a nerve. Does not anyone wonder why 13 states have joined an amicus on this issue. Could it be the old “where there is smoke, there is fire” adage suggesting that something is not what it should be?
As a former underwriter (8 yrs), former broker (2 yrs), former regulator (27 yrs), former chair of the NAIC Credit History Working Group, and current regulatory consultant (8 yrs), my view is that these Commissioners are doing their job in the public interest. Had the insurance industry been a bit more forthcoming with data early in the process, this issue would not be the persistent morass that it is today. The mere fact that the underlying algorithms used in credit history use are secret tends to support the continuing suspicions surrounding this issue. Suspicions that the Companies are in a position to manipulate the data to accomplish a de facto redlining. A suspicion that I share.
The fact that many companies have incorporated credit history into the rating process rather than rely on its “predictive” value for underwriting, further confuses the issue. This leads to the issue addressed by the amicus, the failure to comply with the FCRA when credit history use results in higher rates or an adverse action.
Is there a place in the underwriting of risks for credit history use? Probably, and for some lines of business, likely. I am not convinced however, that automobile and homeowners insurance underwriting is that place. I am even less convinced that rates which rely on credit score for those two lines is appropriate.
Thanks, but I think EVERYONE in the industry knows about that study.
What we are looking for is data that says LOW INCOME PEOPLE HAVE CREDIT SCORES THAT ARE JUST AS GOOD AS RICH PEOPLE.
IF that aint true, then poor people are paying more for insurance casue they are poor. Is that ok? Maybe it is, thats what we are arguing about as a Nation right now. Thats all im saying. Ive got a good score so I dont really care, but some of my clients take out their anger on me so its not much fun.
I wish our insurance commissisioners would spend more time and resources fighting real problems in the insurance industry. Besides, anyone who really understands the insurance scoring method knows that credit is only one factor used in the overall rating of a client. In addition, each company uses different ratios to determine their own company insurance ratings. Choicepoint (a private for profit company) creates the insurance scores which allows the insurance companies to fairly apply rates based on their key indicators that are proven with \”empirical data\” to indicate the potential risk to the carrier. Last time I checked, most insurance contracts are unilateral agreements and if the consumer doesn\’t like CREDIT SCORING, then perhaps they should shop somewhere else. Finally, if credit or insurance scoring didn\’t work then most companies would have abandon this practice years ago. For the record, I believe most companies have converted to this method of underwriting for auto and home p&c.
Remember the old saying \”numbers don\’t lie but liars use numbers\”. You can say what you will about the studies but in truth this is nothing more than another form of redlining. It\’s not a big reach to suggest that the credit scores in any big city with a low income area (say Detriot)will be less than the more affluent areas (say Auburn Hills). Add in the fact that roughly 30% of credit reports have errors and I\’d say you are using junk science. If you agree with credit based underwriting, do you also feel that your education level should be allowed? Many companies are using that now also. Add it up, credit scores and education levels….hmmm Do you see the patern here?
Credit scores should be used in underwriting property risks due to the risk of fraud but in no way should it be used for auto insurance.
Interesting you should bring up Choicepoint. Weren\’t they hacked by someone pretending to be Ford Motor Credit? Some 50,000 identities were stolen. And Choicepoint didn\’t reveal it until the courts forced them to. CYA all the way! So then Choicepoint turns around and reports lower scores for the people who had their identity stolen from THEIR computers?
I just know there is too much fraud and too easy to manipulate a score. Drops 30 pts if you open a new charge account. Can drop if you shop your mortgage- the mortgage companies adjust for this, but do insurance companies?
In theory, I could end up paying $500 more in insurance premium because I went to 5 different banks for the best rate to finance my home?
Or because I didn\’t work for 2 months and fell behind on credit cards? (caught up in 2 months, but the numbers still dropped)
I think if they\’re going to use your credit report, they should at least give a chance to refute it.
Have these people who claim to have \’perfect credit\’ ever been sick, divorced, or have some major event happen that put them in a bind? Let\’s see how happy they are to pay higher interest rates and premiums after they do.
Yea verily, I remember the good old days
before credit scoring. That\’s when I made
5-10% more auto commission. Lets get back to that quickly (in the name of anti- discriminaton, or whatever).
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Abe:
No one is going to show you the data, rating algorithms and studies are proprietary. Even when actuaries file rate filings with the state, they don\’t file all the nitty-gritty.
MC:
You made Bob\’s point for him. We live in a \”keeping up with the joneses\” society. People want these things. People always want things they can\’t afford. However, it is responsibility that will restrain these purchases, and thereby reducing credit card debt.
Danny P:
Your argument that allowing credit scoring allows race based underwriting in the back door is in itself a racist argument, since you yourself are making some racial assumptions about income and race. This is even worse than saying underwriting by zip code is race-based.
I am not making racial assuptions, read my post more carefully please. I said \”What if\” in order to make an analogy.
You get analogies right? They are on the SAT. As far as your \”no one is going to show you the data\” argument is concerned, credit scores are compiled by credit agencies like Choicepoint, not insurance companies.
Also, the credit agencies are interlinked with the governement, thats how they legally controll all our personal info remember?
So the statistic im looking for should be public record, maybe its out there somewhere, maybe its hidden for a reason, imagine that.
Back in 2003 a company named EPIC Actuaries, LLC put together their study -\”The Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Insurance Loss Propensity\”. It\’s not exactly light reading. If you are a numbers person, you will love it, if you are not – your going to give yourself a headache. You can probably find this study by doing a simple google search.
I deduct by some of these responses, some of you have not seen this study or any other studies that have to do with this correlation. As a professional, I believe it is \”our duty\” as Agents/Brokers/Producers to fully understand this correlation so that we may pass the knowledge onto our clients – the insured. They ARE our assets and we need to look after them in that light. The only way to win the game is to know how it\’s played. Happy Holidays, enjoy the reading.
Wow, looks like Commissioner Denn has touched a nerve. Does not anyone wonder why 13 states have joined an amicus on this issue. Could it be the old “where there is smoke, there is fire” adage suggesting that something is not what it should be?
As a former underwriter (8 yrs), former broker (2 yrs), former regulator (27 yrs), former chair of the NAIC Credit History Working Group, and current regulatory consultant (8 yrs), my view is that these Commissioners are doing their job in the public interest. Had the insurance industry been a bit more forthcoming with data early in the process, this issue would not be the persistent morass that it is today. The mere fact that the underlying algorithms used in credit history use are secret tends to support the continuing suspicions surrounding this issue. Suspicions that the Companies are in a position to manipulate the data to accomplish a de facto redlining. A suspicion that I share.
The fact that many companies have incorporated credit history into the rating process rather than rely on its “predictive” value for underwriting, further confuses the issue. This leads to the issue addressed by the amicus, the failure to comply with the FCRA when credit history use results in higher rates or an adverse action.
Is there a place in the underwriting of risks for credit history use? Probably, and for some lines of business, likely. I am not convinced however, that automobile and homeowners insurance underwriting is that place. I am even less convinced that rates which rely on credit score for those two lines is appropriate.
Thanks, but I think EVERYONE in the industry knows about that study.
What we are looking for is data that says LOW INCOME PEOPLE HAVE CREDIT SCORES THAT ARE JUST AS GOOD AS RICH PEOPLE.
IF that aint true, then poor people are paying more for insurance casue they are poor. Is that ok? Maybe it is, thats what we are arguing about as a Nation right now. Thats all im saying. Ive got a good score so I dont really care, but some of my clients take out their anger on me so its not much fun.
I wish our insurance commissisioners would spend more time and resources fighting real problems in the insurance industry. Besides, anyone who really understands the insurance scoring method knows that credit is only one factor used in the overall rating of a client. In addition, each company uses different ratios to determine their own company insurance ratings. Choicepoint (a private for profit company) creates the insurance scores which allows the insurance companies to fairly apply rates based on their key indicators that are proven with \”empirical data\” to indicate the potential risk to the carrier. Last time I checked, most insurance contracts are unilateral agreements and if the consumer doesn\’t like CREDIT SCORING, then perhaps they should shop somewhere else. Finally, if credit or insurance scoring didn\’t work then most companies would have abandon this practice years ago. For the record, I believe most companies have converted to this method of underwriting for auto and home p&c.
Remember the old saying \”numbers don\’t lie but liars use numbers\”. You can say what you will about the studies but in truth this is nothing more than another form of redlining. It\’s not a big reach to suggest that the credit scores in any big city with a low income area (say Detriot)will be less than the more affluent areas (say Auburn Hills). Add in the fact that roughly 30% of credit reports have errors and I\’d say you are using junk science. If you agree with credit based underwriting, do you also feel that your education level should be allowed? Many companies are using that now also. Add it up, credit scores and education levels….hmmm Do you see the patern here?
Credit scores should be used in underwriting property risks due to the risk of fraud but in no way should it be used for auto insurance.
Yea in New Jersey Geico changes rates based on your job. Next they will have a discount if you own a Gecko.
Interesting you should bring up Choicepoint. Weren\’t they hacked by someone pretending to be Ford Motor Credit? Some 50,000 identities were stolen. And Choicepoint didn\’t reveal it until the courts forced them to. CYA all the way! So then Choicepoint turns around and reports lower scores for the people who had their identity stolen from THEIR computers?
I just know there is too much fraud and too easy to manipulate a score. Drops 30 pts if you open a new charge account. Can drop if you shop your mortgage- the mortgage companies adjust for this, but do insurance companies?
In theory, I could end up paying $500 more in insurance premium because I went to 5 different banks for the best rate to finance my home?
Or because I didn\’t work for 2 months and fell behind on credit cards? (caught up in 2 months, but the numbers still dropped)
I think if they\’re going to use your credit report, they should at least give a chance to refute it.
Have these people who claim to have \’perfect credit\’ ever been sick, divorced, or have some major event happen that put them in a bind? Let\’s see how happy they are to pay higher interest rates and premiums after they do.
Yea verily, I remember the good old days
before credit scoring. That\’s when I made
5-10% more auto commission. Lets get back to that quickly (in the name of anti- discriminaton, or whatever).