Running an agency was so much simplier when we used only driving and loss records. However, about 70% of my customers would see a rate increase if the carriers did away with the use of credit. That is up from about 60% several years ago. As far as customers with credit problems due to medical bills – that isn’t a problem if an agency provides good service to their customers. The law mandates that if a customer can show that medical bills are a material negative factor in regards to their credit score then, a carrier can not use credit as part of the rating process. In my agency, we help customers submit their data to underwriting. Underwriting changes their rating score to an “I” for incomplete – which gives an average or better than average premium.
I am troubled about the credit scoring of customers that use little or no credit. The good news is that my primary carrier (Farmers) has changed their credit model so that we are seeing these customers now get good credit scores vs the old models which gave them either bad, no hits or incomplete scores. The new model seems to put substantial weight for bad credit history but, little or no weight to those that rarely or ever use credit. This has resulted in customers that live in the worst areas of town having some of the best credit scores in my agency.
As stated before, why are there so many different credit scoring models? All of the models show that people with extremelly bad credit are more likely to have losses. All of the models show that people with extremelly good credit are less likely to have any losses. It is the majority of the customers that fall in between that are effected differently according to whatever credit rating model their carrier uses. Unlike driving or loss records, the credit model used by one carrier may or may not include risk factors used by other carriers. Carriers are not using credit on a level playing field. I feel that the American Academy of Actuaries and related organizations need to agree upon a standard set of factors that must be used for all credit rating in regards to insurance. Any model that falls outside of the agreed factors would be invalid. All of us need to relay this to our customers and our legislators.
I still see the traditional rating factors such as driving and loss records being about 85% of the premiums. Even then, some carriers use loss records differently. The carrier isn’t using certain types of losses to deliberately increase premium. The carrier’s experience with certain types of losses has simply been better or worse with some more than others so they weigh types of losses differently. I see this more in property than auto underwriting. It doesn’t matter if the customer has the best possible credit score – if they have had too many or the wrong type of loss sometimes the carrier won’t offer coverage at any price.
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Running an agency was so much simplier when we used only driving and loss records. However, about 70% of my customers would see a rate increase if the carriers did away with the use of credit. That is up from about 60% several years ago. As far as customers with credit problems due to medical bills – that isn’t a problem if an agency provides good service to their customers. The law mandates that if a customer can show that medical bills are a material negative factor in regards to their credit score then, a carrier can not use credit as part of the rating process. In my agency, we help customers submit their data to underwriting. Underwriting changes their rating score to an “I” for incomplete – which gives an average or better than average premium.
I am troubled about the credit scoring of customers that use little or no credit. The good news is that my primary carrier (Farmers) has changed their credit model so that we are seeing these customers now get good credit scores vs the old models which gave them either bad, no hits or incomplete scores. The new model seems to put substantial weight for bad credit history but, little or no weight to those that rarely or ever use credit. This has resulted in customers that live in the worst areas of town having some of the best credit scores in my agency.
As stated before, why are there so many different credit scoring models? All of the models show that people with extremelly bad credit are more likely to have losses. All of the models show that people with extremelly good credit are less likely to have any losses. It is the majority of the customers that fall in between that are effected differently according to whatever credit rating model their carrier uses. Unlike driving or loss records, the credit model used by one carrier may or may not include risk factors used by other carriers. Carriers are not using credit on a level playing field. I feel that the American Academy of Actuaries and related organizations need to agree upon a standard set of factors that must be used for all credit rating in regards to insurance. Any model that falls outside of the agreed factors would be invalid. All of us need to relay this to our customers and our legislators.
I still see the traditional rating factors such as driving and loss records being about 85% of the premiums. Even then, some carriers use loss records differently. The carrier isn’t using certain types of losses to deliberately increase premium. The carrier’s experience with certain types of losses has simply been better or worse with some more than others so they weigh types of losses differently. I see this more in property than auto underwriting. It doesn’t matter if the customer has the best possible credit score – if they have had too many or the wrong type of loss sometimes the carrier won’t offer coverage at any price.