although, it was ruled in favor of the insurance company….what i have yet to figure out, is why is so important that we have to use credit to determine a risk for insurance…if someone has bad credit, yes, it not good to loan them money…but is not insurance based on driving?..it’s not based on if that vehicle is going to be fraudlent for a claim…although insurance companies like to use the law of large numbers, where does it end…we can always say that a cup is half full or half empty…i sometimes think we go to far thinking that folks are out for money…in many cases every company has an siu and each state as a fraud unit to catch those folks…insurance should be based 80% on driving…
The reason insurers want to be able to use credit history to rate/underwrite policies is because it works. We don’t necessarily know WHY it works, but it does work. On AVERAGE and with the effects of all traditional rating variables (including Age, gender, use of the vehicle, and driving history) accounted for, insureds with a low score file more claims and larger claims than those with an average or above average score.
The credit score used by your insurer is not the same one used by the bank when you apply for a loan. It is derived from the same data, but it is weighted differently and there are some data elements that the insurer is not permitted to use (income, for example.)
I personally don’t like having to use it for rating, but any company who doesn’t is going to get their butt kicked in the competetive market.
The other reason insurers want to hang on to credit is that they don’t want to be told what they can and cannot use for rating a policy. If we let the government get its foot in that door, it’s the first step down a very slippery slope.
I’m an agent. Explain this to my accounts… A young physician or dentist buys an office, purchases expensive medical equipment and has several credit cards. He or she makes over $300,000…
Or, a wealthy business person who builds nice multimillion dollar house, pays cash to build it then decides to go to a bank and replinish half his payout with a million dollar loan. This husband & Wife, each have an unlimited American Express card. Their income is nearly one million dollars per year from work and even more from investments. Because each of the above have high limit credit cards, have recently borrowed money and were diligent enough to check several lenders for the best rate, they suffer a high credit score. No consideration is given to their income and ability to pay
Are they worse risks than those who have the same score because they don’t pay their bills?
IM an Insurance Agent as well, and i feel that the Credit Scores should NOT reflect
multiple credit cards or high limit cards.
I think if we are talking credit worthyness, i think payment history should be the only criteria used. IF they pay ontime – good credit, if they dont then lesser credit.
I admit, I have a horrible credit history. I got into credit card trouble in college and it has taken me a long time to learn the responsibility that comes with it.
On the other hand, I’m a good driver, pay my premium on time all the time, never had to pay out for a claim, no accidents, no tickets, i don’t drive a ridiculously expensive car, nor is it a sports car, etc…
I admit, I would be frustrated if my insurance premium were based on my credit history because the two histories aren’t relative nor congruent with each other.
Plus, and I don’t even know how I feel about saying this, If people with lower incomes are using credit to aid in their monthly income, and you tack a big premium on them because they have bad credit due to that….odds are, they are going to drive around without any insurance at all.
As an agent – I DON’T care one way or the other. Maybe things are different in California since the passage of Prop 103, but I could care less about credit scores. If the carriers are using it and applying it fairly to everyone great. If no one is using, that’s fine too. As an independent agent I will use whatever company is the best fit for each prospect, so if company A is hurting themselves by using the score when no-one else is, that is their loss. Who cares?
And let’s not forget that we are paid commission on the premium. The higher the premium the higher the commission – of course market competition will keep the prices in check. A lot of noise about nothing (at least in California) Alan.
While I agree that credit scoring makes good underwriting, I must also say that Safeco pushes every envelope they possibly can. They will stick it to you on their commission statements in everyway possible. Safeco needs to get with the times or continue to lose their market share.
The Supreme Court sided with two insurance companies Monday in a case involving alleged violations of the Fair Credit Reporting Act. The law requires insurance companies and other businesses …
Back to article
When did the Supreme court help your $$$$$$$. If you have lots and lots money you can run over people, make the rules for we ????
We have updated our privacy policy to be more clear and meet the new requirements of the GDPR. By continuing to use our site, you accept our revised Privacy Policy.
although, it was ruled in favor of the insurance company….what i have yet to figure out, is why is so important that we have to use credit to determine a risk for insurance…if someone has bad credit, yes, it not good to loan them money…but is not insurance based on driving?..it’s not based on if that vehicle is going to be fraudlent for a claim…although insurance companies like to use the law of large numbers, where does it end…we can always say that a cup is half full or half empty…i sometimes think we go to far thinking that folks are out for money…in many cases every company has an siu and each state as a fraud unit to catch those folks…insurance should be based 80% on driving…
The reason insurers want to be able to use credit history to rate/underwrite policies is because it works. We don’t necessarily know WHY it works, but it does work. On AVERAGE and with the effects of all traditional rating variables (including Age, gender, use of the vehicle, and driving history) accounted for, insureds with a low score file more claims and larger claims than those with an average or above average score.
The credit score used by your insurer is not the same one used by the bank when you apply for a loan. It is derived from the same data, but it is weighted differently and there are some data elements that the insurer is not permitted to use (income, for example.)
I personally don’t like having to use it for rating, but any company who doesn’t is going to get their butt kicked in the competetive market.
The other reason insurers want to hang on to credit is that they don’t want to be told what they can and cannot use for rating a policy. If we let the government get its foot in that door, it’s the first step down a very slippery slope.
Credit also can reflect a person’s responsibility level and the more responsible the driver is the less likely they will cause an accident.
I’m an agent. Explain this to my accounts… A young physician or dentist buys an office, purchases expensive medical equipment and has several credit cards. He or she makes over $300,000…
Or, a wealthy business person who builds nice multimillion dollar house, pays cash to build it then decides to go to a bank and replinish half his payout with a million dollar loan. This husband & Wife, each have an unlimited American Express card. Their income is nearly one million dollars per year from work and even more from investments. Because each of the above have high limit credit cards, have recently borrowed money and were diligent enough to check several lenders for the best rate, they suffer a high credit score. No consideration is given to their income and ability to pay
Are they worse risks than those who have the same score because they don’t pay their bills?
IM an Insurance Agent as well, and i feel that the Credit Scores should NOT reflect
multiple credit cards or high limit cards.
I think if we are talking credit worthyness, i think payment history should be the only criteria used. IF they pay ontime – good credit, if they dont then lesser credit.
I admit, I have a horrible credit history. I got into credit card trouble in college and it has taken me a long time to learn the responsibility that comes with it.
On the other hand, I’m a good driver, pay my premium on time all the time, never had to pay out for a claim, no accidents, no tickets, i don’t drive a ridiculously expensive car, nor is it a sports car, etc…
I admit, I would be frustrated if my insurance premium were based on my credit history because the two histories aren’t relative nor congruent with each other.
Plus, and I don’t even know how I feel about saying this, If people with lower incomes are using credit to aid in their monthly income, and you tack a big premium on them because they have bad credit due to that….odds are, they are going to drive around without any insurance at all.
As an agent – I DON’T care one way or the other. Maybe things are different in California since the passage of Prop 103, but I could care less about credit scores. If the carriers are using it and applying it fairly to everyone great. If no one is using, that’s fine too. As an independent agent I will use whatever company is the best fit for each prospect, so if company A is hurting themselves by using the score when no-one else is, that is their loss. Who cares?
And let’s not forget that we are paid commission on the premium. The higher the premium the higher the commission – of course market competition will keep the prices in check. A lot of noise about nothing (at least in California) Alan.
hey love….GEICO’s there for you, love….it’s all about saving money….and love….we won this lawsuit & you lost!
While I agree that credit scoring makes good underwriting, I must also say that Safeco pushes every envelope they possibly can. They will stick it to you on their commission statements in everyway possible. Safeco needs to get with the times or continue to lose their market share.
The Supreme Court sided with two insurance companies Monday in a case involving alleged violations of the Fair Credit Reporting Act. The law requires insurance companies and other businesses …
Back to article
When did the Supreme court help your $$$$$$$. If you have lots and lots money you can run over people, make the rules for we ????