credit has nothing to do with future claims and geico knows this.It only affects the ability to pay overpriced ins. premiums.I currently work for a company that only uses driving history for underwriting and is very profitable.Geico uses credit history to place drivers into less favorable catergories to make a profit if that person cannot maintain the payment structure.At least thats what they told us in training.
According to the CAS study, I am getting screwed because I have zero revolving credit. Evidently I need to have a bunch of credit cards, just never use them.
You are using less credit than other folks therefore you have less to be evaluated on.
Insurance score and Credit score are slightly different but there are some similarities. Some of the things I seem to remember from the Progressive model and other models were:
1. It is better to have 50% (not 0,25, or 90%) of the available balance on credit cards used.
2. You should not have in excess of $10K on credit cards.
3. You get good points for every month a checking/savings account has open.
4. You get neg points for late payments.
5. Bankruptcies, collections, etc are very bad.
6. Excessive store cards are bad.
7. Long histories of timely mortgages and car payments are good.
This is why cash paying folks get a \’No Score\’ as opposed to a \’No Hit\’ or a low score.
Also, the data used in models vary from provider to provider. Some providers may use data that another provider will classify as \’unvalidated\’ and not use. That means that scores can vary between providers.
someone who has no credit receives a poor credit premium under these plans, even though they technically have no credit rating to base it on. Know personally.
I know I promised, my final posting…..but. All of this credit scoring is interesting, but whar does it have to do with rewarding insure\’s for claims-free and cite-free driving NOTHING. Its really scarey that we can use unrelated data to determine insurance rates. What if we used height on drivers license (can\’t use weight everyone lies)and we predicted anyone under 5\’4\” has more losses (which might have some correlation)would we use that to basically surcharge short people. Please play with you #\’s have fun, but it really does not belong on the real world.
Inaccurate credit reports are difficult to correct and once corrected the inaccuracies may resurface the following year.
Don, an earlier poster, states “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.”
In other words, an underwriter does not evaluate the credit score; the process is automated and extenuating or mitigating circumstances are not considered.
Some may see this as a more sophisticated approach that eliminates the need for underwriting, and others may disagree.
I have read the entire study from the C.A.S. and find it very hard to believe that you are referring someone to a study with statistics that are over a decade old! Gain some up to date knowledge regarding this subject many changes in reporting, lifestyles and numerous other things have changed and your sources are very out dated.
I disagree with your logic. Any factor that accurately identifies risks that are likely to cost more more fairly proportions the costs across the spectrum of risks. Look at it from the perspective of the consumer who pays the lower premium because they represent, regardless of reason, a lower risk of claim. Isn\’t unfairly discrimintory to not charge them the lower rate it has been proven they deserve?
As far as the bus example, it isn\’t an applicable analogy. Bus service is generally a government subsidized benefit for the population. Insurance isn\’t and shouldn\’t be due to the morale and moral hazards that would be incurred. I suggest better examples would be:
Taxi – Charges by the distance segment, risk, based on costs to get there plus a reasonable profit.
Landlord – Charges a higher rent and security deposit based on the assumed greater risk of a tenent with a pet.
If you were to privatize the bus service and have that service have certain buses carry engineers and others carry (assumed)dirty roofers, all other being the same or otherwise mitigated, over time the bus company would charge a higher rate for the roofers in order to compensate for its higher costs.
Auto Insurance is a funny product: A promise to pay for a loss that is at least partially controllable by the insureds actions. You can\’t socialize it for the reasons mentioned above, Massachusetts and NJ proof positive, but if you make it completely objective (fairly discriminatory)someone -class is going to suffer, pay more. The leftover question is are the risks paying the premium for the risk the represent? Regardless of anything subjective a yes answer to that can be the only acceptable solution…
1. It\’s not monopolize…Regulate into the ground perhaps. Monopolize would mean one company would write all the business. Ask the folks in NJ how well that went.
2. Every insurer in the US would love a 10% underwriting profit.
3. How would you calculate the up to 10%? On a year that I run a 150% loss due to the next Katrina do I get several years of extra profit?
4. Massachusetts and Michigan have something similar and they have some of the highest rates in the US.
5. Where is the encouragement for competition? We basically would end up with a cost plus business model and we\’ve seen how well that does in the defense industry.
6. Dictator Chavez stick to screwing up investment in your energy infrastructure.
Everyone wants low rates, higher than value payouts, no rate increases, all the discounts and none of the surcharges. You can have one or two of them but it will be at the expense of the others.
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credit has nothing to do with future claims and geico knows this.It only affects the ability to pay overpriced ins. premiums.I currently work for a company that only uses driving history for underwriting and is very profitable.Geico uses credit history to place drivers into less favorable catergories to make a profit if that person cannot maintain the payment structure.At least thats what they told us in training.
According to the CAS study, I am getting screwed because I have zero revolving credit. Evidently I need to have a bunch of credit cards, just never use them.
You are not getting screwed.
You are using less credit than other folks therefore you have less to be evaluated on.
Insurance score and Credit score are slightly different but there are some similarities. Some of the things I seem to remember from the Progressive model and other models were:
1. It is better to have 50% (not 0,25, or 90%) of the available balance on credit cards used.
2. You should not have in excess of $10K on credit cards.
3. You get good points for every month a checking/savings account has open.
4. You get neg points for late payments.
5. Bankruptcies, collections, etc are very bad.
6. Excessive store cards are bad.
7. Long histories of timely mortgages and car payments are good.
This is why cash paying folks get a \’No Score\’ as opposed to a \’No Hit\’ or a low score.
Also, the data used in models vary from provider to provider. Some providers may use data that another provider will classify as \’unvalidated\’ and not use. That means that scores can vary between providers.
someone who has no credit receives a poor credit premium under these plans, even though they technically have no credit rating to base it on. Know personally.
I know I promised, my final posting…..but. All of this credit scoring is interesting, but whar does it have to do with rewarding insure\’s for claims-free and cite-free driving NOTHING. Its really scarey that we can use unrelated data to determine insurance rates. What if we used height on drivers license (can\’t use weight everyone lies)and we predicted anyone under 5\’4\” has more losses (which might have some correlation)would we use that to basically surcharge short people. Please play with you #\’s have fun, but it really does not belong on the real world.
Inaccurate credit reports are difficult to correct and once corrected the inaccuracies may resurface the following year.
Don, an earlier poster, states “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.”
In other words, an underwriter does not evaluate the credit score; the process is automated and extenuating or mitigating circumstances are not considered.
Some may see this as a more sophisticated approach that eliminates the need for underwriting, and others may disagree.
I have read the entire study from the C.A.S. and find it very hard to believe that you are referring someone to a study with statistics that are over a decade old! Gain some up to date knowledge regarding this subject many changes in reporting, lifestyles and numerous other things have changed and your sources are very out dated.
I really think we have forgot that these statistics are people, if it is unfair we should not do it…………
I disagree with your logic. Any factor that accurately identifies risks that are likely to cost more more fairly proportions the costs across the spectrum of risks. Look at it from the perspective of the consumer who pays the lower premium because they represent, regardless of reason, a lower risk of claim. Isn\’t unfairly discrimintory to not charge them the lower rate it has been proven they deserve?
As far as the bus example, it isn\’t an applicable analogy. Bus service is generally a government subsidized benefit for the population. Insurance isn\’t and shouldn\’t be due to the morale and moral hazards that would be incurred. I suggest better examples would be:
Taxi – Charges by the distance segment, risk, based on costs to get there plus a reasonable profit.
Landlord – Charges a higher rent and security deposit based on the assumed greater risk of a tenent with a pet.
If you were to privatize the bus service and have that service have certain buses carry engineers and others carry (assumed)dirty roofers, all other being the same or otherwise mitigated, over time the bus company would charge a higher rate for the roofers in order to compensate for its higher costs.
Auto Insurance is a funny product: A promise to pay for a loss that is at least partially controllable by the insureds actions. You can\’t socialize it for the reasons mentioned above, Massachusetts and NJ proof positive, but if you make it completely objective (fairly discriminatory)someone -class is going to suffer, pay more. The leftover question is are the risks paying the premium for the risk the represent? Regardless of anything subjective a yes answer to that can be the only acceptable solution…
Proof positive ignorance is bliss…
1. It\’s not monopolize…Regulate into the ground perhaps. Monopolize would mean one company would write all the business. Ask the folks in NJ how well that went.
2. Every insurer in the US would love a 10% underwriting profit.
3. How would you calculate the up to 10%? On a year that I run a 150% loss due to the next Katrina do I get several years of extra profit?
4. Massachusetts and Michigan have something similar and they have some of the highest rates in the US.
5. Where is the encouragement for competition? We basically would end up with a cost plus business model and we\’ve seen how well that does in the defense industry.
6. Dictator Chavez stick to screwing up investment in your energy infrastructure.
Everyone wants low rates, higher than value payouts, no rate increases, all the discounts and none of the surcharges. You can have one or two of them but it will be at the expense of the others.