“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????? ”
Possibly the insurance company. If the lending instituation is a mortgage company or financing a car loan, if the customer defaults the can foreclose or reposses and recoup some of their losses.
For an insurance company, it may be risking a $100k plus claim with little or no chance of recouping any of that money.
Depending on the lending institution, there are different risk levels. I know people that can get a $200k home loan, but can’t get a $2k furniture loan. The mortgage company has a better chance of recouping a greater percentage of their losses through foreclosure than a credit company repossessing furniture if that is even a possibility.
Credit scoring works. Why? I don’t know, but I’ve analyzed the numbers at my company and the higher the credit score, the higher the losses. I didn’t really buy into credit scoring until I ran the numbers myself on my company’s data.
For those of you that say, I have customers with good credit scores and lots of claims and vice versa… insurance is about large numbers. Even if you’re looking at a few hundred customers, I’ve looked at numbers for over a hundred thousand customers. And that’s not even for a large company.
We don’t use it as a rater variable, but a simpler thing I’ve looked at is late installment payments. We looked at customers who are late with their installment payments more than twice, even if they never cancel, and they have about a 20% higher loss ratio than customers who pay on time. Again I don’t know why, but the numbers are there.
ok, we can make a cup 1/2 empty or 1/2 full. we can always strew numbers to fit any category we want. the fact of the matter is, usually someone with a higher score, can probably afford a small minor repair on their car and not file an insurance claim. but those of the lower statue, uses the filing correctly to get their vehicle fixed (or so they are supposed to). some folks take the money to fix their car for other items of need. concern i have is truly – are we making this a bigger deal than it shud be. personally, a risk is based on how they use the car and drive it. the credit score that is being used is based mainly on those whom are likely to file a claim for an incident. problem with that is, it’s truly an unfair predictor of someone’s driving habits. afterall, an insurance company was designed to restore the value of the object at the time of the loss. some folks are just not flowing with real cash and can afford any vehicle he/she wants. we should not penalize those folks whom are not as fortunate as those whom have the silver spoon. we should flag those whom have a considerable incidences to ensure that they are actually viable payouts vs a driving habit/error. what we shud be concerned with is that the amount to be pd for fixing the veh or injuries is paid to the invidiual entities involved or to make sure the repair is done. remember, just because i might have bad credit does not mean i can’t be a good risk and deserve great rates.
Amen wudchuck. I would assume based on the admant comments supporting credit scoring for insurance that those companies the do not use it and have very competitive rates will all be out of business by the end of next month.
No they won’t. Those companies that don’t use credit scoring are not as competitive with the better risks. Studies show credit scoring works and doesn’t illegally discriminate against minority group. What is so hard to understand here? It works, get over it.
1) i never brought up the issue of minority. so settle down w/that issue.
2) remember, what was written – it was the fact that they related increased of filed claims if the credit score was lower. in reality, just because we file claims does not mean we are a bad risk or bad driver. it means, that we need to have someone fix the car because we don’t have the funds to fix it with our own $$$. Someone whom has lots of money and a great credit score, does not necessarily file a claim – but yet, he/she could be a bad driver and high risk.
****
society today is so set on not owning up to it’s own responsibility for their own actions (rather blame it on someone else or a corporation). or folks like to blame it on being minority. let’s get over it!! our society today has forgotten values of integrity and honor. we let folks take up frivilous lawsuits just to be money hungry. and even then, it’s the lawyers whom make the money off that issue more than the one whom wanted to bring the lawsuit.
so let’s get back to the facts:
insurance was based on risk of the driver. remember the days of lloyds of london – sailing ships and cargo. that was based on the captain’ ability and the ship he commanded. the captain knew that he makes good profit when all the goods arrived at the port. a captain made calls on where to sail, avoid weather damages and many other options throughout the voyage. driving a vehicle is very similar, but it never should be based on how well i do financially. i don’t drive my car for business, making $$$. i work as an agent in the industry. my company uses credit but i don’t agree with it. but as with any numbers value, we can always make/construe the consumer to think anything. JUST LIKE IN POLITICS! i think truly, a fair competive rate is based on their driving skills and not adding in their financial stability/credit.
Auto insurance has little to do with individual exposure. It’s based on the law of large numbers. Based on valid and scientific factors it’s based on how likely you are to file a claim and for what amount. People with better credit scoring file fewer claims for less money. It works and studies show it. What is so bad about this factor as opposed to the other factors used for rating as long as it doesn’t unfairly discriminate, which it does not.
Having seen the effect of credit scoring on premium my concern from a societal view is that it has created a situation for young adults and people with poor credit were they can no longer afford to have insurance. They either do not buy insurance or purchase minimum coverages. The consequences of which are dire. As a part of the insurance industry,, I guess I shouldn’t care, until my car is hit by an uninsured motorist. maybe people with poor credit won’t buy insurance anyway, but if they can’t afford insurance and my insurance company pays for an unisured claim aren’t my rates going to go up eventually anyway?
Having a good score helps me though and I like it.
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“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????? ”
Possibly the insurance company. If the lending instituation is a mortgage company or financing a car loan, if the customer defaults the can foreclose or reposses and recoup some of their losses.
For an insurance company, it may be risking a $100k plus claim with little or no chance of recouping any of that money.
Depending on the lending institution, there are different risk levels. I know people that can get a $200k home loan, but can’t get a $2k furniture loan. The mortgage company has a better chance of recouping a greater percentage of their losses through foreclosure than a credit company repossessing furniture if that is even a possibility.
Credit scoring works. Why? I don’t know, but I’ve analyzed the numbers at my company and the higher the credit score, the higher the losses. I didn’t really buy into credit scoring until I ran the numbers myself on my company’s data.
For those of you that say, I have customers with good credit scores and lots of claims and vice versa… insurance is about large numbers. Even if you’re looking at a few hundred customers, I’ve looked at numbers for over a hundred thousand customers. And that’s not even for a large company.
We don’t use it as a rater variable, but a simpler thing I’ve looked at is late installment payments. We looked at customers who are late with their installment payments more than twice, even if they never cancel, and they have about a 20% higher loss ratio than customers who pay on time. Again I don’t know why, but the numbers are there.
ok, we can make a cup 1/2 empty or 1/2 full. we can always strew numbers to fit any category we want. the fact of the matter is, usually someone with a higher score, can probably afford a small minor repair on their car and not file an insurance claim. but those of the lower statue, uses the filing correctly to get their vehicle fixed (or so they are supposed to). some folks take the money to fix their car for other items of need. concern i have is truly – are we making this a bigger deal than it shud be. personally, a risk is based on how they use the car and drive it. the credit score that is being used is based mainly on those whom are likely to file a claim for an incident. problem with that is, it’s truly an unfair predictor of someone’s driving habits. afterall, an insurance company was designed to restore the value of the object at the time of the loss. some folks are just not flowing with real cash and can afford any vehicle he/she wants. we should not penalize those folks whom are not as fortunate as those whom have the silver spoon. we should flag those whom have a considerable incidences to ensure that they are actually viable payouts vs a driving habit/error. what we shud be concerned with is that the amount to be pd for fixing the veh or injuries is paid to the invidiual entities involved or to make sure the repair is done. remember, just because i might have bad credit does not mean i can’t be a good risk and deserve great rates.
Amen wudchuck. I would assume based on the admant comments supporting credit scoring for insurance that those companies the do not use it and have very competitive rates will all be out of business by the end of next month.
That’s pretty hard to believe considering your ignorance on this issue. Maybe it’s time to retire. Times and methods change.
No they won’t. Those companies that don’t use credit scoring are not as competitive with the better risks. Studies show credit scoring works and doesn’t illegally discriminate against minority group. What is so hard to understand here? It works, get over it.
1) i never brought up the issue of minority. so settle down w/that issue.
2) remember, what was written – it was the fact that they related increased of filed claims if the credit score was lower. in reality, just because we file claims does not mean we are a bad risk or bad driver. it means, that we need to have someone fix the car because we don’t have the funds to fix it with our own $$$. Someone whom has lots of money and a great credit score, does not necessarily file a claim – but yet, he/she could be a bad driver and high risk.
****
society today is so set on not owning up to it’s own responsibility for their own actions (rather blame it on someone else or a corporation). or folks like to blame it on being minority. let’s get over it!! our society today has forgotten values of integrity and honor. we let folks take up frivilous lawsuits just to be money hungry. and even then, it’s the lawyers whom make the money off that issue more than the one whom wanted to bring the lawsuit.
so let’s get back to the facts:
insurance was based on risk of the driver. remember the days of lloyds of london – sailing ships and cargo. that was based on the captain’ ability and the ship he commanded. the captain knew that he makes good profit when all the goods arrived at the port. a captain made calls on where to sail, avoid weather damages and many other options throughout the voyage. driving a vehicle is very similar, but it never should be based on how well i do financially. i don’t drive my car for business, making $$$. i work as an agent in the industry. my company uses credit but i don’t agree with it. but as with any numbers value, we can always make/construe the consumer to think anything. JUST LIKE IN POLITICS! i think truly, a fair competive rate is based on their driving skills and not adding in their financial stability/credit.
Auto insurance has little to do with individual exposure. It’s based on the law of large numbers. Based on valid and scientific factors it’s based on how likely you are to file a claim and for what amount. People with better credit scoring file fewer claims for less money. It works and studies show it. What is so bad about this factor as opposed to the other factors used for rating as long as it doesn’t unfairly discriminate, which it does not.
Having seen the effect of credit scoring on premium my concern from a societal view is that it has created a situation for young adults and people with poor credit were they can no longer afford to have insurance. They either do not buy insurance or purchase minimum coverages. The consequences of which are dire. As a part of the insurance industry,, I guess I shouldn’t care, until my car is hit by an uninsured motorist. maybe people with poor credit won’t buy insurance anyway, but if they can’t afford insurance and my insurance company pays for an unisured claim aren’t my rates going to go up eventually anyway?
Having a good score helps me though and I like it.
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