I\’ll give it a shot Mjolnir. I do not believe insurers use credit scoring in an inappropriate manner AND credit scores in and of themselves are NOT biased…however, due to the number, frequency and severity of errors in the scores themselves and in the formulations used to create the scores those things may seem to be true.
I have a great score, a great claims record and a great insurance rate and I like it that way but unless we can make SCORING companies (NOT CREDITORS) accountable for errors in scores (and when I say accountable I\’m talking do-re-mi) nothing in them will change and nothing will become more fair. Credit scores on a large scale predict the likelihood of loss and numbers don\’t lie but the scores themselves sure do.
Did I get it or did I miss your question altogether?
Peace people.
I\’m not attacking- I\’m seriously wondering- is it the credit scoring process that\’s biased, or are insurers manipulating credit scores in order to deny insurance?
Why would they do that? Why would insurance companies make up a way to underwrite against business that they can make money on??? Oh maybe that is it maybe they are trying to charge the right rate for the person…..
Think about it the more people that a company can write they can then make more money….. but they are in business to make money…
Credit scoring is a biased way of determining risk not insuring \”credit exposures.\” I personally know of one carrier with supposed good hands that will give a rating score of 8 or 9 in a suburban area but a 12 to 16 in a city area. What gives? That\’s credit scoring or REDLINING based on where a risk lives. Don\’t want to write poor or high crime neighborhoods? Just up their credit scores so that they are either rejected or priced out and then tell regulators its a proven underwriting system.
Wait a minute. Don\’t confuse the facts. Credit scoring is an underwriting and risk assessment tool. A tool not used properly is not the tool\’s fault. Is it any surprise you\’d have operator error in the hands of the Good Hands People?
State DOI\’s already have the ability to punish the improper use of underwriting tools.
We don\’t need more regulations and restrictions, we need intelligent moralists that follow the ones we already have. Regulations and restrictions, while sometimes necessary, mask the true problems and hamper effective long-term solutions.
You have got to be kidding me right? You people could not possibly be in the insurance business. Credit Scoring is the best predictor of future loss that we have ever had. Yes people with bad credit have more losses. Thats a fact just like people with many moving violations. Do we stop using driving records in underwriting also. Thats what underwriting is for petes sake. You dicrimate against the bad risk. Credit scoring has helped a lot more people than is has harmed. You can improve your credit score just like you can improve your driving record but it takes time. Wake up. The states without credit scoring will have the highest rates. Thats also a fact.
I don\’t have the greatest of credit history because of bad judgement (mostly in women or wives, of the ex variety).
Does my poor choice in women affect my driving ability. I have NO speeding tickets, NO accidents and not so much as a parking ticket on my driving record which extends back some 20 years.
How is my bad credit an idicator of my driving ability given the factors above?
What you\’ve got to understand is that insurance scoring does not surcharge (punish) those with poor scores. It is a tool used to give a discount (reward) to good risks.
I have offered opinions on InsuranceJournal.com\’s various articles on credit scoring.
When will people realize that a method of underwriting is a generality, a likelihood, a predictor. Just because PersonX has bad credit, and has never filed a claim or gotten into an accident, that is not indicative of the whole sample.
A predictor is not 100%. Just like not all drivers with many speeding tickets cost an insurance company money in claims payouts. However, credit scoring, like a previous poster has said, is the one of the best predictors we have of future loss.
Please note, I said the word LOSS, not ACCIDENT or DRIVING RECORD or something else. The insurance company is in the business of minimizing risk, i.e. minimizing the payments it pays out.
As such, credit risk is one of the best predictors of such that we have.
I am an Insurance agent. One of my customers was rated because of credit. It was due to so many credit cards being open. She had less then $1500 outstanding and had over $50,000 in the bank, her car and house were paid off. So, she canceled several of her unused credit cards. Now, she is rated lower again since she has canceled so many credit cards. Where is the increased risk to the insurance company for this person. It seems the increased risk is to her for increased premium cost.
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I\’ll give it a shot Mjolnir. I do not believe insurers use credit scoring in an inappropriate manner AND credit scores in and of themselves are NOT biased…however, due to the number, frequency and severity of errors in the scores themselves and in the formulations used to create the scores those things may seem to be true.
I have a great score, a great claims record and a great insurance rate and I like it that way but unless we can make SCORING companies (NOT CREDITORS) accountable for errors in scores (and when I say accountable I\’m talking do-re-mi) nothing in them will change and nothing will become more fair. Credit scores on a large scale predict the likelihood of loss and numbers don\’t lie but the scores themselves sure do.
Did I get it or did I miss your question altogether?
Peace people.
I\’m not attacking- I\’m seriously wondering- is it the credit scoring process that\’s biased, or are insurers manipulating credit scores in order to deny insurance?
Why would they do that? Why would insurance companies make up a way to underwrite against business that they can make money on??? Oh maybe that is it maybe they are trying to charge the right rate for the person…..
Think about it the more people that a company can write they can then make more money….. but they are in business to make money…
Credit scoring is a biased way of determining risk not insuring \”credit exposures.\” I personally know of one carrier with supposed good hands that will give a rating score of 8 or 9 in a suburban area but a 12 to 16 in a city area. What gives? That\’s credit scoring or REDLINING based on where a risk lives. Don\’t want to write poor or high crime neighborhoods? Just up their credit scores so that they are either rejected or priced out and then tell regulators its a proven underwriting system.
Wait a minute. Don\’t confuse the facts. Credit scoring is an underwriting and risk assessment tool. A tool not used properly is not the tool\’s fault. Is it any surprise you\’d have operator error in the hands of the Good Hands People?
State DOI\’s already have the ability to punish the improper use of underwriting tools.
We don\’t need more regulations and restrictions, we need intelligent moralists that follow the ones we already have. Regulations and restrictions, while sometimes necessary, mask the true problems and hamper effective long-term solutions.
You have got to be kidding me right? You people could not possibly be in the insurance business. Credit Scoring is the best predictor of future loss that we have ever had. Yes people with bad credit have more losses. Thats a fact just like people with many moving violations. Do we stop using driving records in underwriting also. Thats what underwriting is for petes sake. You dicrimate against the bad risk. Credit scoring has helped a lot more people than is has harmed. You can improve your credit score just like you can improve your driving record but it takes time. Wake up. The states without credit scoring will have the highest rates. Thats also a fact.
I don\’t have the greatest of credit history because of bad judgement (mostly in women or wives, of the ex variety).
Does my poor choice in women affect my driving ability. I have NO speeding tickets, NO accidents and not so much as a parking ticket on my driving record which extends back some 20 years.
How is my bad credit an idicator of my driving ability given the factors above?
What you\’ve got to understand is that insurance scoring does not surcharge (punish) those with poor scores. It is a tool used to give a discount (reward) to good risks.
I have offered opinions on InsuranceJournal.com\’s various articles on credit scoring.
When will people realize that a method of underwriting is a generality, a likelihood, a predictor. Just because PersonX has bad credit, and has never filed a claim or gotten into an accident, that is not indicative of the whole sample.
A predictor is not 100%. Just like not all drivers with many speeding tickets cost an insurance company money in claims payouts. However, credit scoring, like a previous poster has said, is the one of the best predictors we have of future loss.
Please note, I said the word LOSS, not ACCIDENT or DRIVING RECORD or something else. The insurance company is in the business of minimizing risk, i.e. minimizing the payments it pays out.
As such, credit risk is one of the best predictors of such that we have.
I am an Insurance agent. One of my customers was rated because of credit. It was due to so many credit cards being open. She had less then $1500 outstanding and had over $50,000 in the bank, her car and house were paid off. So, she canceled several of her unused credit cards. Now, she is rated lower again since she has canceled so many credit cards. Where is the increased risk to the insurance company for this person. It seems the increased risk is to her for increased premium cost.