The FTC wouldn’t know a reasonable survey if they stepped over one. This theory of theirs is ridiculous. If you examine credit score banding in the United States at this juncture of time, you will find that almost 45% of our nation has credit scores under the so called minimum prime level of 640. In fact, some lenders like AmeriCredit’s CEO stated last December that their “sweet spot” in subprime was 639 down to 550. It is highly unlikely that a large number of Americans are at a greater risk at these levels than those with scoring bands in the 700 to 800 range. In fact, those bands have had pronounced risk factors associated with them.
The insurance industry needs to UNDERWRITE their risks, and look at past performance not some idiotic FTC report with no actuarial basis.
This is nothing more than a scam for the insurance industry to assess higher rates on risk factors which are non-existant.
The FTC wouldn’t know a reasonable survey if they stepped over one. This theory of theirs is ridiculous. If you examine credit score banding in the United States at this juncture of time, you will find that almost 45% of our nation has credit scores under the so called minimum prime level of 640. In fact, some lenders like AmeriCredit’s CEO stated last December that their “sweet spot” in subprime was 639 down to 550. It is highly unlikely that a large number of Americans are at a greater risk at these levels than those with scoring bands in the 700 to 800 range. In fact, those bands have had pronounced risk factors associated with them.
The insurance industry needs to UNDERWRITE their risks, and look at past performance not some idiotic FTC report with no actuarial basis.
This is nothing more than a scam for the insurance industry to assess higher rates on risk factors which are non-existant.
I need help with how to explain our rate determination methodology to my customers here in Arkansas.
Upon renewal, even though the majority are receiving our 30/60, ultra preferred, and super preferred discounts for safe driving and no accidents, citations or claims in the past 3 to 5 years their premiums are increasing by from 10% to 45%.
Nearly all of my customers foolishly believe that auto premiums are determined primarily by their driving record and partially by the type vehicle they drive.
I am aware that according to the “studies” people with what Insurance Companies have determined to be bad “Insurance Scores” are much more likely to file claims than those with “good” credit scores. Now, looking at my second paragraph above the facts do not appear to support the “studies”. Additionally, from what we are allowed to see of the reasons for some the negatives in the risk assessment process I don’t believe that some of the negatives are valid in the real world but some appear to be very valid. I have customers we show as having a very bad score making them an insurance risk yet they are to lending institutions acceptable customers. Who has the most risk?????
Anyway, the bottom line is look at the second paragraph. Those are the people I need to be able to provide some logical explanation to for their rate increase because of their propensity to file claims when they have not filed claims in the past 3 to 5 years.
The scoring model my company uses does not even include an individual’s credit score. Our formula takes into account certain pieces of the credit history, such as number of late pymts and defaults and uses those specific items to determine a score. Those scores are divided into tiers and that is how we determine the rate each customer will be charged.
These factors, along with OTHER UNDERWRITING tools, allow companies to evaluate each risk and assign the proper premium.
Have the customer write a letter to the insurance company asking for an explanation. Companies are required to respond with a reason for any adverse action taken agaist a customer with regards to credit information.
It really doesn’t matter what facts are put out, many will not agree with this procedure. Other studies have shown it works and is reflective of the exposure, but they, of course, are slanted or wrong somehow. I am not involved in a line affected by this procedure, but I know from our company experience that it works. It’s a good indicator of risk. Prove it’s not somehow and then come back with your facts.
Read my comments. Those are facts. They are the facts that raise the rates charged based on credit score but not on driving record or claims filed. I have more claims filed by people with “excellent” scores that those with bad. I assume you work for an insurance company or the FTC.
CB/Peter Polstien – It’s really as simple as 2 + 2 = 4. Use of a credit model + other underwriting variables = proper rating. Virtually every study shows this strong correlation.
Put whatever spin on it you like CB/Peter, at the end of the day, you’re still wrong.
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Nobody important I agree you probably are. I hate to disapoint you old timer but I started in the insurance industry in 1964.
The FTC wouldn’t know a reasonable survey if they stepped over one. This theory of theirs is ridiculous. If you examine credit score banding in the United States at this juncture of time, you will find that almost 45% of our nation has credit scores under the so called minimum prime level of 640. In fact, some lenders like AmeriCredit’s CEO stated last December that their “sweet spot” in subprime was 639 down to 550. It is highly unlikely that a large number of Americans are at a greater risk at these levels than those with scoring bands in the 700 to 800 range. In fact, those bands have had pronounced risk factors associated with them.
The insurance industry needs to UNDERWRITE their risks, and look at past performance not some idiotic FTC report with no actuarial basis.
This is nothing more than a scam for the insurance industry to assess higher rates on risk factors which are non-existant.
The FTC wouldn’t know a reasonable survey if they stepped over one. This theory of theirs is ridiculous. If you examine credit score banding in the United States at this juncture of time, you will find that almost 45% of our nation has credit scores under the so called minimum prime level of 640. In fact, some lenders like AmeriCredit’s CEO stated last December that their “sweet spot” in subprime was 639 down to 550. It is highly unlikely that a large number of Americans are at a greater risk at these levels than those with scoring bands in the 700 to 800 range. In fact, those bands have had pronounced risk factors associated with them.
The insurance industry needs to UNDERWRITE their risks, and look at past performance not some idiotic FTC report with no actuarial basis.
This is nothing more than a scam for the insurance industry to assess higher rates on risk factors which are non-existant.
HELP ME PLEASE !!!
I need help with how to explain our rate determination methodology to my customers here in Arkansas.
Upon renewal, even though the majority are receiving our 30/60, ultra preferred, and super preferred discounts for safe driving and no accidents, citations or claims in the past 3 to 5 years their premiums are increasing by from 10% to 45%.
Nearly all of my customers foolishly believe that auto premiums are determined primarily by their driving record and partially by the type vehicle they drive.
I am aware that according to the “studies” people with what Insurance Companies have determined to be bad “Insurance Scores” are much more likely to file claims than those with “good” credit scores. Now, looking at my second paragraph above the facts do not appear to support the “studies”. Additionally, from what we are allowed to see of the reasons for some the negatives in the risk assessment process I don’t believe that some of the negatives are valid in the real world but some appear to be very valid. I have customers we show as having a very bad score making them an insurance risk yet they are to lending institutions acceptable customers. Who has the most risk?????
Anyway, the bottom line is look at the second paragraph. Those are the people I need to be able to provide some logical explanation to for their rate increase because of their propensity to file claims when they have not filed claims in the past 3 to 5 years.
The scoring model my company uses does not even include an individual’s credit score. Our formula takes into account certain pieces of the credit history, such as number of late pymts and defaults and uses those specific items to determine a score. Those scores are divided into tiers and that is how we determine the rate each customer will be charged.
These factors, along with OTHER UNDERWRITING tools, allow companies to evaluate each risk and assign the proper premium.
Chuck,
Have the customer write a letter to the insurance company asking for an explanation. Companies are required to respond with a reason for any adverse action taken agaist a customer with regards to credit information.
It really doesn’t matter what facts are put out, many will not agree with this procedure. Other studies have shown it works and is reflective of the exposure, but they, of course, are slanted or wrong somehow. I am not involved in a line affected by this procedure, but I know from our company experience that it works. It’s a good indicator of risk. Prove it’s not somehow and then come back with your facts.
Read my comments. Those are facts. They are the facts that raise the rates charged based on credit score but not on driving record or claims filed. I have more claims filed by people with “excellent” scores that those with bad. I assume you work for an insurance company or the FTC.
I certainly do work for an insurance company. A degree in Insurance and 30 years in the business. What qualifications do you you have?
CB/Peter Polstien – It’s really as simple as 2 + 2 = 4. Use of a credit model + other underwriting variables = proper rating. Virtually every study shows this strong correlation.
Put whatever spin on it you like CB/Peter, at the end of the day, you’re still wrong.