Sorry Senior Agent–I was not considering credit score as an indicator of potential claims frequency, but rather payment issues. As you well know, carriers are cash-flow dependant. If their investment income is decent, they can easily afford to charge less in premium than they pay in losses. Accordingly, those who are slow in paying–even if they don’t default, reduce the carrier’s investment income, thereby requiring higher premiums (and additional staff to collect). I agree however, that there’s no direct correlation between credit and claims. That’s what the CLUE is for.
What there are saying is that now if you want car insurance you have to have credit. There are acutally people out there that pay cash and does not do “Credit Cards”. This is descrimination of the highest form.
You can still buy insurance they just may charge a little more for no credit. Never known anyone to pay cash for cars and houses but I guess it happens. If you do this you’re either very rich or have an undocumented source of income (read: “probably illegal”). If you’re rich you probably know the value of good credit and have a few credit cards for this very reason, even though you could pay cash. If your income comes from undocumented sources…sorry.
I have a different kind of client adversely affected by credit scoring. The family who has someone in the military. They may have trouble keeping up, they may have trouble maintaining their property, but that does not make them a “bad” risk. We already have rules in place to address this, such as 10 day notice of cancellation for non-pay and CLUE. If credit scoring is to be used at all. Let there be one model used by ALL companies. I have repeatedly been asked why the customer can qualify to buy a $300,000 home, but can be turned down for insurance on that home due to credit score. It’s to the point of being ridiculous. I suggest that Cut the Crud run his OWN credit score. He might be unpleasantly surprised. With identity theft running rampant, a credit score is just a number that means practically nothing unless you are the one affected by it.
I have a different kind of client adversely affected by credit scoring. The family who has someone in the military. They may have trouble keeping up, they may have trouble maintaining their property, but that does not make them a “bad” risk. We already have rules in place to address this, such as 10 day notice of cancellation for non-pay and CLUE. If credit scoring is to be used at all. Let there be one model used by ALL companies. I have repeatedly been asked why the customer can qualify to buy a $300,000 home, but can be turned down for insurance on that home due to credit score. It’s to the point of being ridiculous. I suggest that Cut the Crud run his OWN credit score. He might be unpleasantly surprised. With identity theft running rampant, a credit score is just a number that means practically nothing unless you are the one affected by it.
LLCJ – Having to post 4 separate brief comments are indicative or your reasoning and communication skills which certainly leads one to question the first.
I have been an insurance agent for 30 years, so what? The problem is this, more often than not the credit scores are based on wrong information. It’s the old garbage in, garbage out problem. Trying to get one fixed can become a nightmare and take years. (How long does it take to “fix” identity theft?) Even though the company will tell you that they cannot take into account a persons military hardship, or medical expenses, try to get it fixed. I have, and sometimes it does not get “fixed” until the policy renews, and even then, the renewal usually needs to be “fixed” also. I do not doubt that credit can determine if someone is a payment risk, and even will go so far as to say that they may be at risk for more claims. But doesn’t the CLUE report address claims? How many of those claims are fraud? Maybe we should fix that? It has been proven that companies that place a priority on eliminating fraud have become more profitable, to the point of paying dividends to their good clients. How many companies just pay a claim to make it go away because it would be more expensive to fight it? For years the homeowner’s premiums have been too low and replacement cost values under estimated. Why not fix that? Now the companies are trying to catch up and using credit score to do it. Deductibles are another HUGE problem. Why not make a 1% deductible manditory? If you want to eliminate “nusiance” claims, then let’s just do away with the lower deductible options. What ever happened to “underwriting”? When you are asked, “What information does the company use from your credit file? And what can you do to improve your credit score? What do you tell them? For a captive agent it may be an easy answer because the use is appied uniformly and maybe that company can actually explain it. But for an independent, every company uses different information and in a different way. Try explaining that. Some companies have a brochure that explains their stance on the use of credit and some are very good at explaining but others just say “we are using it, get over it or go somewhere else with your insurance”. Bottom line is using a credit scoring model that is not standardized, with a standard set of rules that apply to everyone, regardless of what company they choose to purchase their insurance from is not a responsible way to use credit scores. Using them as they currently are used is similar to the FDA releasing a drug on the market because “studies” say it is safe, when in fact it has to be recalled years later because the “studies” were wrong. I do not have much faith in studies, since they are almost always skewed to represent beliefs of the group performing
the study. Either apply the score uniformly, or lose it. It should also be noted, that many other states have already banned it’s use, or standardized it. Are they struggling with higher premiums and a higher incidence of claims? Or have they just learned how to be prudent underwriters again?
Smarty – ‘studies’ can be manipulated to produce the results needed or wanted and, again, it is just ‘numbers’.
I don’t know about everyone else, but I am tired of being a ‘number’.
My spouse has been in the lending profession for 36 years and I in the insurance profession for 32 years and we have both been consumers of both so I may have a little more insight about this topic.
It was a sad day when our private, community banks were bought by the big corporations and the local banker no longer made the decision about approval of a loan based on more than a number – he used judgment and other criteria – occupation and years on the job, community standing and reputation, closed accounts, etc. In fact, there wasn’t a credit ‘score’ – he had to evaluate the credit ‘report’. In bad times – loss of a job, medical emergencies or illnesses – his customer paid him because of a thing called ‘trust’and respect.
For those of you who have been in the insurance business for at least 20 years, you probably remember the days when underwriters did the same thing: they used their brains and made decisions.
Several years ago, my family faced a financial crisis and I was declined coverage due to a low credit score. We still had a very good income, paid our bills, put our son through college, and did NOT file frivolous claims…in fact, the only loss we had was an auto accident my son had.
We are amazed at technology but often disgusted by today’s society…?????
I believe that the use of credit scoring can be a good underwriting “tool”, however the same credit score could be used to “Red Line” based on excellent credit Vs very poor credit.
Granted just because a client has good credit doesn’t mean they have newer homes or live in better areas, but in general that is the case. This could be used to try to insure only the better “risks” and avoid the areas that are poorer “risks”.
It is my feeling that the “tools” for the possibility of this discrimination shouldn’t be allowed.
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Sorry Senior Agent–I was not considering credit score as an indicator of potential claims frequency, but rather payment issues. As you well know, carriers are cash-flow dependant. If their investment income is decent, they can easily afford to charge less in premium than they pay in losses. Accordingly, those who are slow in paying–even if they don’t default, reduce the carrier’s investment income, thereby requiring higher premiums (and additional staff to collect). I agree however, that there’s no direct correlation between credit and claims. That’s what the CLUE is for.
What there are saying is that now if you want car insurance you have to have credit. There are acutally people out there that pay cash and does not do “Credit Cards”. This is descrimination of the highest form.
You can still buy insurance they just may charge a little more for no credit. Never known anyone to pay cash for cars and houses but I guess it happens. If you do this you’re either very rich or have an undocumented source of income (read: “probably illegal”). If you’re rich you probably know the value of good credit and have a few credit cards for this very reason, even though you could pay cash. If your income comes from undocumented sources…sorry.
I have a different kind of client adversely affected by credit scoring. The family who has someone in the military. They may have trouble keeping up, they may have trouble maintaining their property, but that does not make them a “bad” risk. We already have rules in place to address this, such as 10 day notice of cancellation for non-pay and CLUE. If credit scoring is to be used at all. Let there be one model used by ALL companies. I have repeatedly been asked why the customer can qualify to buy a $300,000 home, but can be turned down for insurance on that home due to credit score. It’s to the point of being ridiculous. I suggest that Cut the Crud run his OWN credit score. He might be unpleasantly surprised. With identity theft running rampant, a credit score is just a number that means practically nothing unless you are the one affected by it.
I have a different kind of client adversely affected by credit scoring. The family who has someone in the military. They may have trouble keeping up, they may have trouble maintaining their property, but that does not make them a “bad” risk. We already have rules in place to address this, such as 10 day notice of cancellation for non-pay and CLUE. If credit scoring is to be used at all. Let there be one model used by ALL companies. I have repeatedly been asked why the customer can qualify to buy a $300,000 home, but can be turned down for insurance on that home due to credit score. It’s to the point of being ridiculous. I suggest that Cut the Crud run his OWN credit score. He might be unpleasantly surprised. With identity theft running rampant, a credit score is just a number that means practically nothing unless you are the one affected by it.
LLCJ – Having to post 4 separate brief comments are indicative or your reasoning and communication skills which certainly leads one to question the first.
I have been an insurance agent for 30 years, so what? The problem is this, more often than not the credit scores are based on wrong information. It’s the old garbage in, garbage out problem. Trying to get one fixed can become a nightmare and take years. (How long does it take to “fix” identity theft?) Even though the company will tell you that they cannot take into account a persons military hardship, or medical expenses, try to get it fixed. I have, and sometimes it does not get “fixed” until the policy renews, and even then, the renewal usually needs to be “fixed” also. I do not doubt that credit can determine if someone is a payment risk, and even will go so far as to say that they may be at risk for more claims. But doesn’t the CLUE report address claims? How many of those claims are fraud? Maybe we should fix that? It has been proven that companies that place a priority on eliminating fraud have become more profitable, to the point of paying dividends to their good clients. How many companies just pay a claim to make it go away because it would be more expensive to fight it? For years the homeowner’s premiums have been too low and replacement cost values under estimated. Why not fix that? Now the companies are trying to catch up and using credit score to do it. Deductibles are another HUGE problem. Why not make a 1% deductible manditory? If you want to eliminate “nusiance” claims, then let’s just do away with the lower deductible options. What ever happened to “underwriting”? When you are asked, “What information does the company use from your credit file? And what can you do to improve your credit score? What do you tell them? For a captive agent it may be an easy answer because the use is appied uniformly and maybe that company can actually explain it. But for an independent, every company uses different information and in a different way. Try explaining that. Some companies have a brochure that explains their stance on the use of credit and some are very good at explaining but others just say “we are using it, get over it or go somewhere else with your insurance”. Bottom line is using a credit scoring model that is not standardized, with a standard set of rules that apply to everyone, regardless of what company they choose to purchase their insurance from is not a responsible way to use credit scores. Using them as they currently are used is similar to the FDA releasing a drug on the market because “studies” say it is safe, when in fact it has to be recalled years later because the “studies” were wrong. I do not have much faith in studies, since they are almost always skewed to represent beliefs of the group performing
the study. Either apply the score uniformly, or lose it. It should also be noted, that many other states have already banned it’s use, or standardized it. Are they struggling with higher premiums and a higher incidence of claims? Or have they just learned how to be prudent underwriters again?
Fact – A credit card is a financial contract.
Fact – An insurance policy is a financial contract.
Fact – A persons handling of one financial contract usually indicates how they will handle other financial contracts.
Smarty – ‘studies’ can be manipulated to produce the results needed or wanted and, again, it is just ‘numbers’.
I don’t know about everyone else, but I am tired of being a ‘number’.
My spouse has been in the lending profession for 36 years and I in the insurance profession for 32 years and we have both been consumers of both so I may have a little more insight about this topic.
It was a sad day when our private, community banks were bought by the big corporations and the local banker no longer made the decision about approval of a loan based on more than a number – he used judgment and other criteria – occupation and years on the job, community standing and reputation, closed accounts, etc. In fact, there wasn’t a credit ‘score’ – he had to evaluate the credit ‘report’. In bad times – loss of a job, medical emergencies or illnesses – his customer paid him because of a thing called ‘trust’and respect.
For those of you who have been in the insurance business for at least 20 years, you probably remember the days when underwriters did the same thing: they used their brains and made decisions.
Several years ago, my family faced a financial crisis and I was declined coverage due to a low credit score. We still had a very good income, paid our bills, put our son through college, and did NOT file frivolous claims…in fact, the only loss we had was an auto accident my son had.
We are amazed at technology but often disgusted by today’s society…?????
I believe that the use of credit scoring can be a good underwriting “tool”, however the same credit score could be used to “Red Line” based on excellent credit Vs very poor credit.
Granted just because a client has good credit doesn’t mean they have newer homes or live in better areas, but in general that is the case. This could be used to try to insure only the better “risks” and avoid the areas that are poorer “risks”.
It is my feeling that the “tools” for the possibility of this discrimination shouldn’t be allowed.