studies show credit scoring works and company profits (since the mold crisis) prove it is a viable marketing tool. i also think that most people feel that there are some very specific problems with the current credit scoring system. sometimes bad things happen to good people. families having there wage earners sent to war, unforseen major health complications that pile up medical bills that can never be repaid (our failed medical system is a far more pressing problem than credit scoring – where are our priorities?). shopping for insurance and having multiple credit scores run also hurts your credit causing people that know this out of the market and keeping them with a policy that may have inflated rates or less coverage than they want or need. i hope that reason prevails and credit scoring system that will give a true and fair picture of an insured’s financial picture that allows the companies to give a more deserving rate to the consumers of Texas.
What Senior Agent and the like forget is that correlation is not determined by personal experience via anecdotal research, but by tried, tested and thorough statistical mathematical modelling and testing. The correlation is there and it is strong.
Quote: “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.”
If this is true, credit scoring should never ever be used. Like Smarty said, why don’t people have problems with phone companies using credit to deny phones? Why is it only insurance that cause people conniptions?
Judgement causes greater discrimination that these texan senators are trying to prevent. Judgement, unfortunately, is the source of racism (whether explicit, or implicit), nepotism and other such errors. What we need in insurance is a primarily objective method to determine rate and eligibility, with room for considerations of extenuating circumstances.
This is not a corporate trend, it is a common sense trend.
Thanks for the information LLCJ. As much as I dislike the “nonperfected” aspects of scoring at present, experience has shown me it does have merit. It does work.Unfortunately it is affecting those who do NOT have the attibutes to place them as higher risk. As stated earlier, if fine tuned and it only represented the actual ones the system was set to recognize, we would not be having this issue as it would be like any other underwriting criteria. Credit Scoring was NOT necessarily designed to indicate if someone could pay their insurance premium (although it could be a good factor) or if they were a potential for arson (also a possible good indicator). The big picture is “what kind of lifestyle do they lead”. Are they responsible with their actions and assets. This is what it all boils down to. We protect their liabilities and property. If they aren’t responsibly minded with their affairs of life and contractual obligations how can they be the same with the very assets and actions we insure. Put your underwriting cap on and think about it!
For those who have issues with Credit being used for Auto Insurance because it doesn’t indicate their driving skills, what about these other discounts?
Homeowner – Maybe if you have a garage, it should affect Comprehensive coverage, but why should a homeowner get a discount on liability coverages?
Multi-Car – Because I have more than one car, I’ll have less wrecks?
Paid In Full – Does this not discriminate the same way as you claim credit does? I cannot afford to pay all of my bill up front so why should they get a discount that I can’t?
Prior Insurance – Just because I didn’t have insurance before doesn’t mean I’m going to have a wreck now.
Insurance pricing involves much more than just whether a certain group will have a wreck, it also involves whether a group will file a claim. I worked on the actuarial side for about 5 years. I’m not personally a big fan of credit scoring (maybe because I can’t qualify for the best rates), but I cannot deny that people with better credit scores have fewer claims. I’ve priced with credit scoring being a variable combined with other elements, not as an individual rating factor. It’s not perfect, but no rating variable is.
It’s an objective score that is a valid risk identifier. As it was mentioned before, judgement is much more difficult to use now because of discrimination suits, many of them valid.
I agree with those that say that using credit for job applications is much worse. If I have poor credit, I can’t get a good job which might help allieve my credit situation. What a viscious cycle.
& for those who complain that they have good enough credit to get a house, but not homeowner’s insurance, I had good enough credit to get a $150k home loan, but couldn’t get a $1000 loan the same week to have tile installed.
In reality, this is just another political hot potato issue, like mold was in the last bi-annual circus, I mean Texas Legislature. These folks only come to town for 140 days every other year so they really have to work the media and issues to convince the rest of the voters they are really “out there supporting the little guy, etc.” It gets so deep that hip waders should be standard issue in DC or any state capitol.
Did the laws passed in the last session actually force down rates, or did the underwriting cycle affect rates? These legislators will claim they did it. We will never know. If there are votes in it, they will claim just about anything.
On the other hand, credit scores are a somewhat objective tool to be used in the underwriting process. If you, as an agent, feel your client is being hit unfairly, get in there and fight for them and convince underwriting the score does not reflect a bad risk. To many agents do not want to work at qualifying their risk before submission, work with underwriting to get the real client picture there, or to properly handle the bad news to the client. There is a four letter bad word in this for some agents…WORK. If the shoe fits wear it.
The folks who came up with credit scores had to show and convince others of the validity of the system. Do not fault them for hard work, originality, creativity, and knowing how to sell their ideas. Do not fault the carriers looking for objective, measurable, and reliable data and systems to improve performance and capital return, manage risks, and reduce legal challenges.
Is the system prefect? NO. Can it be improved? Yes. So figure it out and retire early. Otherwise, accept that we are using a flawed system and imperfect tools and trying to make the best of it all.
Robert, I am just curious… what companies do you represent where you can actually work with an underwriter? Other than commercial accounts, and E & S, everything is so automated that underwriters don’t exist anymore. I really am interested in an answer to my question, I am not being facetious.
REality, if you notice, I was responding to 4 separate posts. I wonder, did you read any of the contents of the 4 posts, or did you simply see 4 posts and assume something. Funny thing, is that you didn’t comment on the content.
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studies show credit scoring works and company profits (since the mold crisis) prove it is a viable marketing tool. i also think that most people feel that there are some very specific problems with the current credit scoring system. sometimes bad things happen to good people. families having there wage earners sent to war, unforseen major health complications that pile up medical bills that can never be repaid (our failed medical system is a far more pressing problem than credit scoring – where are our priorities?). shopping for insurance and having multiple credit scores run also hurts your credit causing people that know this out of the market and keeping them with a policy that may have inflated rates or less coverage than they want or need. i hope that reason prevails and credit scoring system that will give a true and fair picture of an insured’s financial picture that allows the companies to give a more deserving rate to the consumers of Texas.
What Senior Agent and the like forget is that correlation is not determined by personal experience via anecdotal research, but by tried, tested and thorough statistical mathematical modelling and testing. The correlation is there and it is strong.
But CTC, statistics have shown that there is a definite correlation between claims, loss ratios, and credit scores. Read the actuarial studies.
Quote: “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.”
If this is true, credit scoring should never ever be used. Like Smarty said, why don’t people have problems with phone companies using credit to deny phones? Why is it only insurance that cause people conniptions?
Judgement causes greater discrimination that these texan senators are trying to prevent. Judgement, unfortunately, is the source of racism (whether explicit, or implicit), nepotism and other such errors. What we need in insurance is a primarily objective method to determine rate and eligibility, with room for considerations of extenuating circumstances.
This is not a corporate trend, it is a common sense trend.
Thanks for the information LLCJ. As much as I dislike the “nonperfected” aspects of scoring at present, experience has shown me it does have merit. It does work.Unfortunately it is affecting those who do NOT have the attibutes to place them as higher risk. As stated earlier, if fine tuned and it only represented the actual ones the system was set to recognize, we would not be having this issue as it would be like any other underwriting criteria. Credit Scoring was NOT necessarily designed to indicate if someone could pay their insurance premium (although it could be a good factor) or if they were a potential for arson (also a possible good indicator). The big picture is “what kind of lifestyle do they lead”. Are they responsible with their actions and assets. This is what it all boils down to. We protect their liabilities and property. If they aren’t responsibly minded with their affairs of life and contractual obligations how can they be the same with the very assets and actions we insure. Put your underwriting cap on and think about it!
For those who have issues with Credit being used for Auto Insurance because it doesn’t indicate their driving skills, what about these other discounts?
Homeowner – Maybe if you have a garage, it should affect Comprehensive coverage, but why should a homeowner get a discount on liability coverages?
Multi-Car – Because I have more than one car, I’ll have less wrecks?
Paid In Full – Does this not discriminate the same way as you claim credit does? I cannot afford to pay all of my bill up front so why should they get a discount that I can’t?
Prior Insurance – Just because I didn’t have insurance before doesn’t mean I’m going to have a wreck now.
Insurance pricing involves much more than just whether a certain group will have a wreck, it also involves whether a group will file a claim. I worked on the actuarial side for about 5 years. I’m not personally a big fan of credit scoring (maybe because I can’t qualify for the best rates), but I cannot deny that people with better credit scores have fewer claims. I’ve priced with credit scoring being a variable combined with other elements, not as an individual rating factor. It’s not perfect, but no rating variable is.
It’s an objective score that is a valid risk identifier. As it was mentioned before, judgement is much more difficult to use now because of discrimination suits, many of them valid.
I agree with those that say that using credit for job applications is much worse. If I have poor credit, I can’t get a good job which might help allieve my credit situation. What a viscious cycle.
& for those who complain that they have good enough credit to get a house, but not homeowner’s insurance, I had good enough credit to get a $150k home loan, but couldn’t get a $1000 loan the same week to have tile installed.
In reality, this is just another political hot potato issue, like mold was in the last bi-annual circus, I mean Texas Legislature. These folks only come to town for 140 days every other year so they really have to work the media and issues to convince the rest of the voters they are really “out there supporting the little guy, etc.” It gets so deep that hip waders should be standard issue in DC or any state capitol.
Did the laws passed in the last session actually force down rates, or did the underwriting cycle affect rates? These legislators will claim they did it. We will never know. If there are votes in it, they will claim just about anything.
On the other hand, credit scores are a somewhat objective tool to be used in the underwriting process. If you, as an agent, feel your client is being hit unfairly, get in there and fight for them and convince underwriting the score does not reflect a bad risk. To many agents do not want to work at qualifying their risk before submission, work with underwriting to get the real client picture there, or to properly handle the bad news to the client. There is a four letter bad word in this for some agents…WORK. If the shoe fits wear it.
The folks who came up with credit scores had to show and convince others of the validity of the system. Do not fault them for hard work, originality, creativity, and knowing how to sell their ideas. Do not fault the carriers looking for objective, measurable, and reliable data and systems to improve performance and capital return, manage risks, and reduce legal challenges.
Is the system prefect? NO. Can it be improved? Yes. So figure it out and retire early. Otherwise, accept that we are using a flawed system and imperfect tools and trying to make the best of it all.
Robert, I am just curious… what companies do you represent where you can actually work with an underwriter? Other than commercial accounts, and E & S, everything is so automated that underwriters don’t exist anymore. I really am interested in an answer to my question, I am not being facetious.
REality, if you notice, I was responding to 4 separate posts. I wonder, did you read any of the contents of the 4 posts, or did you simply see 4 posts and assume something. Funny thing, is that you didn’t comment on the content.