I’ve always wondered why we have to PAY to get our FICO scores. And why are there three different credit bureaus with three different criteria? The bigger question is, why Farmers Insurance can show two different scores (which they keep secret from the agent) for auto and home insurance? It’s the same insured!
Anyone that has looked at a credit score from Experian lately can see their use of Vantage scoring of 500-990 may lead to sever problems in the future. They can’t seem to get things correct within their own keypunch data entry much less exhibit consistent results from the same data 2 days in a row.
ok..-let’s get back to basics:
FICO scores,or credit scoring. or whatever you call them, are basically an unfair method for the determination of an automobile or home policy rate.
DESPITE a known relationship between financial problems and driving habits, home claims, etc.. As a licensed insurance professional of over 45 years, I believe we should absolutely aim to insure SAFE operators and homeowners who care for their property.
This “credit scoring” of policies has gone too far, and should be reversed.
And just WHO is “Isaac” ?
Insurance scoring is one of the finest developments in P&C insurance underwriting. It adds an important dimension to risk analysis. Combined with traditonal underwriting practices it premits ratings based of thousands of price points to best segment risks. Insurance scoring is another important step forward in underwriting sophistication.
-Then why does the industry continue to have poor results in numerous venues, including the necessity of having to (eg) abandon certain classes of business and different regions of America, together with the never-ending complaint that rates need to be continually increased ?
First, please define unfair, then make an argument explaining why it is fair to make insureds with good credit scores subsidize those with poor credit scores. I pay my bills/replace my roof on time, why should I have to make up for those who let their bills/roof repair slide until the last possible minute? When there is an error in my credit report/crack in my windshield, I fix it immediately so the problem doesn’t get worse. People with good/bad credit scores (most of the time) show/lack financial discipline, and use their savings accounts/insurance as a way to supplement their insurance/savings accounts.
“I’ve always wondered why we have to PAY to get our FICO scores.”
The credit bureaus are a business, not a charity.
“And why are there three different credit bureaus with three different criteria?”
Because the bureaus are a business, they compete with each other. The criteria/scores are different and the bureaus compete over which banks use which data. Each thinks that its score is more predictive of loan default or that its data is cleaner than the others.
“The bigger question is, why Farmers Insurance can show two different scores (which they keep secret from the agent) for auto and home insurance? It’s the same insured!”
Because home and auto are two different products — and NEITHER score is the one you’ll see at the bank if you apply for a loan. The elements of a credit report that are predictive of a homeowners loss are different than those that predict an auto loss, which are different from those that predict a loan default. All the scores are compiled from the same underlying data, but some data pieces are weighted differently (or omitted altogether) depending on the intended use of the score.
So, let me get this right: In spite of the fact that using SOME information from credit reports has a direct correlation in determining which groups of insureds will have the fewest claims, it’s unfair? So we should simply raise everyone’s rates so that the people who don’t pay their bills AND file claims get lower rates, at MY expense?
Why is it anytime something has people pay “their share” of a cost, it’s unfair. When it’s “EVERYONE SHOULD PAY FOR ME” it’s “fair”.
It’s not hocus pocus, it’s simple statistical studies. I’ve seen it over and over. Credit doesn’t seem “logical”, but it really is a great predictor of claims within large groups.
Using the same logic, we should simply eliminate the differences in rates between people who drive fast and have accidents and people who don’t. Let’s all charge them the same (ie: most would pay more so a few could pay less) so that we’re “fair”. Perhaps that wooden roofed house in the fire zone should pay the same as the concrete building next to the fire station to be “fair”.
Companies don’t use credit to be tricky, it’s all about finding a way to offer the lowest, most competitive rate possible while still having a reasonable expectation of profit (they don’t always make profit, they often lose money when there are anamolies or if they price too low for competitive reasons).
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I’ve always wondered why we have to PAY to get our FICO scores. And why are there three different credit bureaus with three different criteria? The bigger question is, why Farmers Insurance can show two different scores (which they keep secret from the agent) for auto and home insurance? It’s the same insured!
Anyone that has looked at a credit score from Experian lately can see their use of Vantage scoring of 500-990 may lead to sever problems in the future. They can’t seem to get things correct within their own keypunch data entry much less exhibit consistent results from the same data 2 days in a row.
ok..-let’s get back to basics:
FICO scores,or credit scoring. or whatever you call them, are basically an unfair method for the determination of an automobile or home policy rate.
DESPITE a known relationship between financial problems and driving habits, home claims, etc.. As a licensed insurance professional of over 45 years, I believe we should absolutely aim to insure SAFE operators and homeowners who care for their property.
This “credit scoring” of policies has gone too far, and should be reversed.
And just WHO is “Isaac” ?
Insurance scoring is one of the finest developments in P&C insurance underwriting. It adds an important dimension to risk analysis. Combined with traditonal underwriting practices it premits ratings based of thousands of price points to best segment risks. Insurance scoring is another important step forward in underwriting sophistication.
-Then why does the industry continue to have poor results in numerous venues, including the necessity of having to (eg) abandon certain classes of business and different regions of America, together with the never-ending complaint that rates need to be continually increased ?
First, please define unfair, then make an argument explaining why it is fair to make insureds with good credit scores subsidize those with poor credit scores. I pay my bills/replace my roof on time, why should I have to make up for those who let their bills/roof repair slide until the last possible minute? When there is an error in my credit report/crack in my windshield, I fix it immediately so the problem doesn’t get worse. People with good/bad credit scores (most of the time) show/lack financial discipline, and use their savings accounts/insurance as a way to supplement their insurance/savings accounts.
You answered your own question! Congratulations!
“I’ve always wondered why we have to PAY to get our FICO scores.”
The credit bureaus are a business, not a charity.
“And why are there three different credit bureaus with three different criteria?”
Because the bureaus are a business, they compete with each other. The criteria/scores are different and the bureaus compete over which banks use which data. Each thinks that its score is more predictive of loan default or that its data is cleaner than the others.
“The bigger question is, why Farmers Insurance can show two different scores (which they keep secret from the agent) for auto and home insurance? It’s the same insured!”
Because home and auto are two different products — and NEITHER score is the one you’ll see at the bank if you apply for a loan. The elements of a credit report that are predictive of a homeowners loss are different than those that predict an auto loss, which are different from those that predict a loan default. All the scores are compiled from the same underlying data, but some data pieces are weighted differently (or omitted altogether) depending on the intended use of the score.
Thank you Ratemaker.
So, let me get this right: In spite of the fact that using SOME information from credit reports has a direct correlation in determining which groups of insureds will have the fewest claims, it’s unfair? So we should simply raise everyone’s rates so that the people who don’t pay their bills AND file claims get lower rates, at MY expense?
Why is it anytime something has people pay “their share” of a cost, it’s unfair. When it’s “EVERYONE SHOULD PAY FOR ME” it’s “fair”.
It’s not hocus pocus, it’s simple statistical studies. I’ve seen it over and over. Credit doesn’t seem “logical”, but it really is a great predictor of claims within large groups.
Using the same logic, we should simply eliminate the differences in rates between people who drive fast and have accidents and people who don’t. Let’s all charge them the same (ie: most would pay more so a few could pay less) so that we’re “fair”. Perhaps that wooden roofed house in the fire zone should pay the same as the concrete building next to the fire station to be “fair”.
Companies don’t use credit to be tricky, it’s all about finding a way to offer the lowest, most competitive rate possible while still having a reasonable expectation of profit (they don’t always make profit, they often lose money when there are anamolies or if they price too low for competitive reasons).